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.

Friday, August 12, 2011

FTSE 100 - forming head and shoulders?

Although P&F charts do not use time on the y axis, they are quite capable of throwing up patterns that you see in other charts, so here is something to ponder.

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 !!

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