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robls

P & F Charting

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Point and figure is an excellent tool of technical analysis, especially in the hands of skilled TA people like Dorsey-Wright, on the site you linked.

 

Note the XAU breakout on the Philly p&f chart you can find on the link. Those 2 little green "x's" are as bullish as you can get.

 

Dorsey's a friendly guy, too. He's replied to emails I've sent him...very courteously. I think he's 65 or something and remains a champion weight-lifter in his age-group.

Pretty amazing.

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Indeed, P&F charting is a very useful tool - although for me it is just yet another tool in the toolbox; not something I rely exclusively on. Once very nice property of the P&F charts is that the support and resistance lines there are very obvious and easy to spot. Also, the various Buy and Sell signals are easy to define and even a computer can produce it; without a human anal cyst.

 

That said, I prefer to use such charts only for invidual stocks - not for the indices. Mostly because on the indices you have to twiddle with the box size and this can result in very different-looking charts, depending on what box size you pick.

 

Is this the XAU chart you folks mean?

 

SharpChartv05.ServletDriver?chart=$xau,plta[pa][da][f!3!!].gif

 

The breakout occurred much earlier - at 71, when both the red resistance line was broken, and an "ascending tripple top breakout" configuration occurred. This corresponded roughly to the symmetrical triangle breakout on the conventional charts.

 

The target for this formation is 70+3*3=79. (70 is the base of the formation, 3 is the horizontal width of the formation - 3 columns, I mean - and the second 3 is a constant used to measure upside targets; 2 is used for downside targets). That doesn't mean that we'll go there in one straight line, of course - or even that we'll reach it at all. It's just the likely target.

 

Regards,

Vesselin

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Robls, yes, I saw it - but it's text; not an image, so it cannot be posted here.

 

The reason why it looks slightly different from mine is because they aren't using a box size of 1 point. 2 points, perhaps? Yep, that's it. OK, here is a $XAU chart that looks like theirs:

 

SharpChartv05.ServletDriver?chart=$xau,plua[pa][da][f!3!2!].gif

 

Regards,

Vesselin

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So, Vesselin, you're making a distinction between using p&f charts for indices and for individual stocks...but do also believe that it's better GENERALLY to use individual chart patterns rather than index patterns.

 

I've had success starting with the indices. It's my belief that the more information you have, the more accurate a picture you can draw. The more buy and sell decisions reflected on a chart, the better. Therefore, start with the index, see what patterns you can discern and then, move on to the individual stock patterns.

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Point and figure predates barcharts I believe. I cut my teeth on them back in the 60s as a kid. No need to buy software. stockcharts.com has full point and figure charting capability.

 

Given all the technical tools avaiable today, point and figure seems a bit rudimentary. Without cycle analysis, it's pretty difficult to tell when a breakout will succeed and when it will fail.

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Sloth, no, you have misunderstood me. I don't like using P&F charts on the indices mostly because the indices have high absolute values of the price and one has to twiddle with the box size of the P&F chart. This results in very different-looking charts depending on how you have chosen the box size. Individual stocks are normally within the 5-100 price range and you can simply go with the default box size of 1 point per box.

 

I, too, prefer to analyse indices instead of individual stocks. I trade ETFs (mainly QQQ) instead of individual stocks - and even when doing it, I prefer to analyse the COMPX instead of the NDX. Precisely for the reasons you stated - it has more stocks, moves more smoothly, there is more information on the charts.

 

Doc, P&F charts give you a very simple way of determining when the breakout has failed, so you know where to put your stops.

 

Everybody, let me stress it again - P&F charts are just one tool in the toolbox - not the Holy Grail or something to live by exclusively. They are most useful when used in conjunction with all the other tools you can master - cycles, Elliott waves, simple indicators, market breadth, sentiment, etc..

 

Regards,

Vesselin

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I like P&F Charting. I don't use it much. Because I trade in shorter timeframe. There are several patterns in point and figure charting that are useful. I think the main argument is, P&F filters out the noise of time..... Yes, I do have Dorsey's Book. Point&Figure Charting...... which I am sure Doc has in his Book Store. How would I rate the Book? A... for information, D for ease of reading and enjoyment...... It is all there, but just doesn't have the ease of reading as a Dr. A Elders book.........imo

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Ah. I see. Thanks, Vesselin. There's something intriguing about a P&F chart that you don't get with other TA. I think it must be that the time element is de-emphasized and you're mostly dealing with simple price.

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