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 Point n Figure (PnF Charts) - Technical Analysis from A to Z
POINT AND FIGURE

Overview

Point & Figure ("P&F") charts differ from traditional price charts in that they completely disregard the passage of time and only display changes in prices. Rather than having price on the y-axis and time on the x-axis, P&F charts display price changes on both axes. This is similar to Kagi, Renko, and Three Line Break charts.

Interpretation

Point & Figure charts display the underlying supply and demand of prices. A column of Xs shows that demand is exceeding supply (a rally); a column of Os shows that supply is exceeding demand (a decline); and a series of short columns shows that supply and demand are relatively equal.

There are several chart patterns that regularly appear in P&F charts. These include Double Tops and Bottoms, Bullish and Bearish Signal formations, Bullish and Bearish Symmetrical Triangles, Triple Tops and Bottoms, etc. It is beyond the scope of this book to fully explain all of these patterns.

Example

The following two charts both show the prices of Atlantic Richfield. The first chart displays prices in P&F, the second chart displays prices as high, low, close bars.

As I mentioned above, P&F charts focus only on price action. Looking at this P&F chart, you can see that prices were initially contained between a support level at 114 and a resistance level at 121. When prices broke above the resistance level at 121 (the long column of Xs), that level became the new support level. This new support level eventually failed (the long column of Os), prices re-tested the support at 114, made a small rally, and then fell below the 114 support level.

This next chart shows the same pricing information as the preceding P&F chart. You can see that the support and resistance levels are also identifiable in this bar chart, but the P&F chart made it much easier to identify them.

Calculation

Point & Figure charts display an "X" when prices rise by the "box size" (a value you specify) and display an "O" when prices fall by the box size. Note that no Xs or Os are drawn if prices rise or fall by an amount that is less than the box size.

Each column can contain either Xs or Os, but never both. In order to change columns (e.g., from an X column to an O column), prices must reverse by the "reversal amount" (another value you specify) multiplied by the box size. For example, if the box size is three points and the reversal amount is two boxes, then prices must reverse direction six points (three multiplied by two) in order to change columns. If you are in a column of Xs, the price must fall six points to change to a column of Os. If you are in a column of Os, the price must rise six points to change to a column of Xs.

The changing of columns identifies a change in the trend of prices. When a new column of Xs appears, it shows that prices are rallying higher. When a new column of Os appears, it shows that prices are moving lower.

Because prices must reverse direction by the reversal amount, the minimum number of Xs or Os that can appear in a column is equal to the "reversal amount."

The common practice is to use the high and low prices (not just the close) to decide if prices have changed enough to display a new box.

 Point and Figure Patterns Stock Screener Action P&F Buy P&F Sell Double Bottom Double Top Triple Bottom Triple Top Bullish Catapult Bearish Catapult Inverted Head and Shoulders Head and Shoulders Ascending Triangle Breakout Descending Triangle Breakout Symmetrical Triangle Bullish Breakout Symmetrical Triangle Bearish Breakout Long Tail Down Reversal Long Tail Up Reversal Bear Trap Bull Trap

 Content Technical Analysis Price Fields Charts Support & Resistance Trends Moving Averages Indicators Market Indicators Line Studies Periodicity The Time Element Conclusion

 Reference Reference  Absolute Breadth Index  Accumulation/Distribution  Accumulation Swing Index  Advance/Decline Line  Advance/Decline Ratio  Advancing-Declining Issues  Advancing, Declining,   Unchanged Volume  Andrews' Pitchfork  Arms Index  Average True Range  Bollinger Bands  Breadth Thrust  Bull/Bear Ratio  Candlesticks, Japanese  CANSLIM  Chaikin Oscillator  Commodity Channel Index  Commodity Selection Index  Correlation Analysis  Cumulative Volume Index  Cycles  Demand Index  Detrended Price Oscillator  Directional Movement  Dow Theory  Ease of Movement  Efficient Market Theory  Elliott Wave Theory  Envelopes (Trading Bands)  Equivolume  Fibonacci Studies  Four Percent Model  Fourier Transform  Fundamental Analysis  Gann Angles  Herrick Payoff Index  Interest Rates  Kagi  Large Block Ratio  Linear Regression Lines  MACD  Mass Index  McClellan Oscillator  McClellan Summation Index  Median Price  Member Short Ratio  Momentum  Money Flow Index  Moving Averages  Negative Volume Index  New Highs-Lows Cumulative  New Highs-New Lows  New Highs/Lows Ratio  Odd Lot Balance Index  Odd Lot Purchases/Sales  Odd Lot Short Ratio  On Balance Volume  Open Interest  Open-10 TRIN  Option Analysis  Overbought/Oversold  Parabolic SAR  Patterns  Percent of Resistance  Percent Retracement  Performance  Point & Figure  Positive Volume Index  Price and Volume Trend  Price Oscillator  Price Rate-of-Change  Public Short Ratio  Puts/Calls Ratio  Quadrant Lines  Relative Strength, Comparative  Relative Strength Index  Renko  Speed Resistance Lines  Spreads  Standard Deviation  STIX  Stochastic Oscillator  Swing Index  Three Line Break  Time Series Forecast  Tirone Levels  Total Short Ratio  Trade Volume Index  Trendlines  TRIX  Turn Price  Typical Price  Ultimate Oscillator  Upside/Downside Ratio  Upside-Downside Volume  Vertical Horizontal Filter  Volatility, Chaikin's  Volume  Volume Oscillator  Volume Rate-of-Change  Weighted Close  Williams' Accumulation/Distribution  Williams' %R  Zig Zag

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