DWA Reference Manual continued.
Point and Figure Chart Basics
The basic point and figure chart shows a column of X's which means
the stock or index is rising. A column of O's means the stock is
falling. Columns of X's and O's alternate back and forth -- they
never appear in the same column. For the first action taken in a
month, a number or letter is used to designate that particular month.
This is how we show the time on the chart.
It takes 3 boxes to reverse from one direction to the other. For
example, if a stock were trading in a column of X's with a top of 45,
it would take a move to 42 to reverse this chart to a column of O's.
Going in the other direction, if a stock were trading in a column of
O's with a current low at 45, it would need a rally to 48 to reverse
the stock back to a column of X's.
Units of Charting
0 - 5 = 1/4 point per box
5 1/2 - 20 = 1/2 point per box
21 - 100 = 1 point per box
102 and up = 2 points per box
Instructions
Given the price of security XYZ, determine the box value and write
the appropriate range of prices in the left margin of the point and
figure grid. Start the chart with the number (or letter)
corresponding to the present month and place it in the box with the
value equal to the previous day's closing price. Depending on whether
the stock price rises or falls during the day, add Xs or Os as
required. If the price does not rise or fall the value of one or more
boxes, make no chart entry.
If the last entry on the chart is an X, check the stock's daily high.
Add Xs if the stock has gone up one or more units on your grid. If
the stock has gone down, look at the daily low to see if a three box
reversal has occurred. If so, move over one column and down one row
and enter the appropriate number of Os. Make no chart entry if the
stock has not moved up enough to warrant more Xs or down enough to
receive at least three Os.
If the last entry on the chart is an O, check the stock's daily low.
Add Os if the stock has gone down one or more units on your grid. If
the stock has gone up, look at the daily high to see if a three box
reversal has occurred. If so, move over one column and up one row and
enter the appropriate number of Xs. Make no chart entry if the stock
has not moved down enough to warrant more Os or up enough to receive
at least three Xs.
Reference to time is made by entering the first action of each month
with that month's number in the grid. For example the first X or O in
May would be replaced with a "5". The months October through December
are noted by A, B, and C, respectively. It is also useful to write
the year below the column in which there is an entry for January of
that year.
Here are two examples of how a chart develops.
EXAMPLE I:
START WITH HIGH: 30 HIGH: 29 3-4 HIGH: 30 3-4 HIGH: 31 1-2
LOW: 29 1-4 LOW: 27 LOW: 26 1-8 LOW: 29 3-8
(Move the chart (Move over one (Move over one (Move the chart
up one box -- column and column and put up one box --
put an X at 30) put 3 O's in 3 X's in at put an X at 31)
at 29,28 27) 28, 29, 30)
31 31 31 31 31 X
30 30 X 30 X 30 X X 30 X X
29 X 29 X 29 X O 29 X O X 29 X O X
28 X 28 X 28 X O 28 X O X 28 X O X
27 X 27 X 27 X O 27 X O 27 X O
26 X 26 X 26 X 26 X 26 X
25 25 25 25 25
EXAMPLE II:
START WITH HIGH: 27 1-4 HIGH: 29 3-4 HIGH: 29 1-8 HIGH: 29 1-4
LOW: 25 7-8 LOW: 27 5-8 LOW: 26 LOW: 25
(Move the chart (Move over one (Move over one (Move the chart
down one box - column and column and put down one box -
put an O at 26) put 3 X's in 3 O's in at put an O at 25)
at 27,28,29) 28, 27,26)
31 31 31 31 31
30 O 30 O 30 O 30 O 30 O
29 O 29 O 29 O X 29 O X 29 O X
28 O 28 O 28 O X 28 O X O 28 O X O
27 O 27 O 27 O X 27 O X O 27 O X O
26 26 O 26 O 26 O O 26 O O
25 25 25 25 25 O |
