Tom Dorsey Q&A Message Board

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Strategies & Market Trends : Tom Dorsey Q&A

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To: Ms. X who wrote ()	2/20/1998 2:09:00 PM
From: Ms. X	of 102

Tom Dorsey Q&A Part 1. Wednesday, Feb 18 Q) I understand the rule for price objective given on page 24 of the book. How was the rule developed? A) Believe it or not the rule comes from the science of Ballistics and was developed in the late 1800's. ----- Q) The definition of a "Bullish Signal Reversal" is a pattern of seven columns of rising bottoms and tops- then when the last top is made in the seventh column, the stock reverses to give a Double Bottom sell signal. Page 59. Does SUNW qualify? A) Not really. I like to see it a little more symmetrical and should look like a flag blowing in the wind off a flag pole. ----- Q) Please have Tom discuss his opinion on using the ZigZag indicator plotted on top of price bars in addition to (or instead of) P&F charting. A) Sorry I don't know anything about ZigZag indicators. ----- Q Is Point and Figure Charting any more or less reliable than candlestick charting ? A) I have no idea as I have never evaluated Candlestick charting. I have used Point & Figures so successfully for over 15 years, I have not ventured out to evaluate other methods. I learn something new with P&F every day. You must find the method that you are the most comfortable with, whether it's Gann Angles or Waves. Then do everything you can to become an expert in it. All methods work in the right hands. The P&F works in most hands. Because it takes time to learn, most investors are not willing to invest in that time so it is truly a very unique group that understands it. ----- Q) What is the reliability of these large vertical counts. (ex. a column of X's extending past 10 boxes or more). A) Very high, although my statement comes from years of use. They are so accurate they are uncanny. There is no study that has been done however. Possibly you would like to do one. ----- Q) An RS chart may be in column of O's down to 1 1/2. (For example a $12 stock with DJIA at about 8000) It would take a move up to 2 1/4 to begin a new column of X's. This three box move means the stock would have to go up 50% better than the market. This means the big move would have already taken place before an RS signal was given. If I find a $12 stock that meets the rest of my screens, should I use different factor to get a more responsive RS chart? A) What if the stock doesn't move but the market goes down? The RS chart will also move up. Also, you have a combination of stock rising and market declining which also affects the RS chart. In your example you are right, it would take a big move in the stock to reverse the chart. ----- Q) A question for Tom Dorsey on his book. His Chapter 5 on "Using Relative Strength calculations" pp 79-89 does not explain how one calculates RS. I've seen formulas for calculating RS for regular charts. Can he provide us a write up on this with formulas? A) Simply divide the price of the stock by the Dow Jones or anything else you want to divide by. Take that number and plot it on a P&F chart and evaluate the same as equities.

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