Академический Документы
Профессиональный Документы
Культура Документы
EXECUTIVE SUMMARY
After completing this tutorial, the technician will understand how point and figure charts are constructed, as well as how to recognise
some chart formations and how to use trend lines on point and figure charts. One of the main uses of point and figure charts is to
determine price objectives. We will discuss the merits of both the horizontal and the vertical price counts.
P & F Charts - Variations of the Double Top & Double Bottom Formation
FORMATIONS IN COMBINATIONS
In example A below, we have an illustration of both the Bullish Signal Formation and the Triple Top Formation combined into one. It
contains essential elements of both formations. It has both higher bottoms and higher tops plus the penetration of three tops.
In example A, the buy signal which takes place at 36c (indicated by the letter B) is both a buy signal on Bullish Signal Formation and a
Triple Top Formation. This chart pattern occurs less frequently than either of the two separately, but when it does occur it is usually a very
strong buy signal. This formation is profitable 79.5% of the time for an average gain of 36%. The average time for such gain is 8 months.
A minimum of five vertical columns is necessary for its completion.
P & F Charts - Formations in Combinations
In example B, we have an illustration of both the Bearish Signal Formation and the Triple Bottom Formation combined into one. It contains
essential elements of both formations. It has both lower tops and lower bottoms plus the penetration of three bottoms. The sell signal
which takes place at 32c (indicated by the letter S) is both a sell signal on Bearish Signal Formation and a Triple Bottom Formation. This
chart pattern occurs less frequently than either of the two separately, but when it does occur it is usually a very strong sell signal. A
minimum of five vertical columns is necessary for its completion.
TREND LINES
The chart patterns discussed in the previous section are but th
e first step in deciding whether a share should be bought or sold. The next step is to determine whether or not the signals they are giving
are in agreement with the basic trend in the share. This is where trend lines assume their importance.
The two most important trend lines to watch are:
The basic Bullish Support Line, and
The basic Bearish Resistance Line.
CONCLUSION
Although Point and Figure (P&F) charts are an interesting method of tracking share price movements, some new technical analysts still do
not use them as much as they should, mainly because of a lack of knowledge or ignorance. However, P& F charts have many advantages
like smoothing out minor fluctuations in the share price. The chartist will then look for certain chart formations for buy and sell signals.
Secondly, the so-called consolidation areas are unique to point and figure charts. The horizontal counts will by then applied to these
consolidation areas to predict how far the price is likely to move when it exits from such a consolidation block.
Imagine being in a position where you have completed your fundamental analysis on the share and everything looks great. Various
technical indicators have also confirmed and given you further buy signals. Now finally, by using point and figure charts, your price
projection on the horizontal count suggests that the share price has a good chance of rising by at least 50% and the probabilities that that
happening is about 80%. Would you invest in the share? In other words, you could use the point and figure chart as a method to measure
the reward and risk ratio.
SUPPORT
If you have any further queries, please feel free to contact our educational team on shaunvdb@psg.co.za or call 0860 PSG PSG (774 774).
Thank you for your support and happy trading!