Welcome to EV's point and figures. This blog is dedicated to the use of point and figure charts in technical analysis.
Although P&F first appeared in charts in the 1930's, it is an often overlooked techique for analysing stocks and charts. A poor relation compared to line and bar charts and their range of momentum indicators. Yet few charts provide a clearer picture of the daily battle between bulls and bears for market control.
Like most methods, it should not be used in isolation. It should form part of an analysts 'tool box' and be used with other techniques to help form an overall view.
The charts that appear on this blog and any accompanying comments are purely for information purposes only - my own personal take on where the prices may be heading. They do not constitute investment advice.
Tuesday, August 23, 2011
To activate the target to the upside, the index needs to pass through 1,210. To activate 990, the index needs to reverse and move through 1,120 and ideally 1,110.
The index pushed through the long term blue bullish support line at 1,170 and is currently in a state of bearish resistance, as denoted by the red line. Unfortunately I won't be around to see how this resolves, i'm off on holiday after tomorrow!
Thursday, August 18, 2011
Friday, August 12, 2011
Could this be the early formation of a right shouldder in a developing head and shoulders pattern. See how the FTSE found solid support (eventually) at 4,800, an level it found clear support at last summer. That measure from the top (6,100) to 4,800 was 1,300 points. If one were to assume this was the neckline, that would provide a target of 3,500, a level where the index found clear support in March 2009.
It may not play out this way but it is plausible that the index could consolidate in a band between 5,050 and 5,400 before eventually giving way and move over. This would be an alternative to another straight down decline similar to the one just witnessed. The 'unactive' target from that most recent column of 23 O's is 2,500, which just does not seem realistic to me (although i'll stand corrected if something really nasty happens!). If the market consolidates for a while, we will start to see new targets to the downside that (if this scenario were to play out) would bring 4,100 in first (also a previous support level), then 3,500.
We'll see !!
Wednesday, August 10, 2011
Monday, August 8, 2011
Just looking at this chart shows the damage wreaked by the bears in the last 5 days. You sense it will rest at 1,040, the area where the market previously found support back in Sept 2010. Note too, the long term blue bullish support line has been breached.
Thursday, August 4, 2011
Eg: 100 stocks in an index, 50 on new PF buy signals, bullish percent = 50%.
Changes in the index up and down can only come from the FIRST buy signal given off the bottom. That's what is recorded and all subseqent buy signals are not counted.
Eg: 100 stocks in an index, index at 50%
Over the next week 12 stocks give new PF buy signals, 10 give new PF sell signals
= a net 2% more stocks on buy signal
As each box represents 2%, a net 2% change allows the chart to rise one box.
You use the same 3 box reversal methodology as for normal PF charts, so here it takes a (3x2%) 6% net buy/sell signal to reverse a column upwards/downwards. As a general rule, areas above 70% and below 30% are the two extremes. Above 70% is overbought and below 30% is oversold.
Wednesday, August 3, 2011
The overall observation is that despite the recent carnage, all of them (save the Nasdaq) are close to levels where they have found support in the past. The RUT looks to be on quite shaky ground to me but may hop back above its support level (see below). For the bears to confirm they have the ball, I'd be looking to see some sort of reversal to the upside first, then look for the bears to come back in and move these indices decisively lower. The initiative is clearly with the bears for now. A further dose of QE will require a reassessment but no sign of that at present.
Starting with the Russell 2000 (5x3), the most obvious point to note is that the blue bullish support line was taken out with the recent decline and we now have bearish resistance, as evidenced by the downward sloping red line. I'm not seeing this on the Dow or Nasdaq.
The first target from the top of 770 was achieved and I have another active target to the downside of 675. However, its quite possible that we may get a reversal to the upside first, as it can be seen that the RUT has had support at the 775 level on 4 previous occasions. I'd be more confident about the 675 target if we get a reversal to the upside first, then another reversal and a decisive move below 770 - this would indicate to me that the bears are firmly in control.
At the moment, there are no obvious targets to the upside, either active or inactive.
I'm using the Dow 100x3 PF to strip out a lot of 'noise' that would be evident with the 50x3 chart. Note here that this chart still has a long term bullish support line in place, which must be respected for now at least (I'll keep an eye on the 50x3 because if we do get a short term reversal, hopefully it will throw up something more meaningful than at present).
The first target from the YTD high of 10,100, given by that column of nine 0's is yet to be activated (sorry, meant to reference 'ua' beside it). The reason being that the index has not fallen below the level where this column reversed back up (11,900). In fact the Dow got subsequent support at this level and we are right on that line again, post yesterday's action.
There is an active target in place of 11,500. And without showing any bias, to the upside there is still an active target in place of 14,500 but note the clear resistance at 12,700.
Note the current column of 18 o's has pushed through the blue bullish support line and we have bearish resistance overhead.
Had it not been for the move below the bullish support line, one potential pattern to keep an eye out for was a 'long tail down' which occurs when the stock/index declines 20 boxes without a reversal - it's a slight rule breach here because according to Tom Dorsey, it can present a potential trading opportunity if the index stays above the support area (which has not happened here). You would buy on the first 3 box reversal to the upside and put in place a stop loss in the box below the 'long tail' (ie stop out on the next double bottom sell signal).
The 10x3 less noisy chart provides a bit more clarity. The index is currently resting at an area where is have previously found support and reversed to the upside. There is an active target to the downside of 1,200 and an inactive one of 1,040. Again, ideally one would be looking for some sort of bounce, then a reveral to the downside, decisively taking out the 1,260/1,250 levels.
There is technically an upside active target of 1,490 still in place and see on this chart the blue bullish support line prevails and must be respected for the time being.
Tuesday, August 2, 2011
....Italian 10 year bond yields touch a EuroZone sovereign debt crisis high....