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Strategies & Market Trends : Point and Figure Charting

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To: Smooth Drive who wrote (3050)	5/15/1998 6:19:00 PM
From: Bwe	Read Replies (1) of 34811

Hi Eric....Wonderful response to my post on the bullish support line (henceforth abbreviated on my own charts and this thread as BSL in your honor) which has prompted some discussion on fine tuning the finest type of stock charting, point & figure charting. Since I know you get Chartcraft charts, I would like you to take a look at the chart of Capital One Financial (COF). COF is a strong stock and a Zacks portfolio recommendation. By the strict definition of the BSL, the BSL from the 12/94 $14 low would've disappeared in 5/97 at $32. A new BSL would've been drawn at the 5/97 low of $31 and that BSL would be your major support going forward. Now let's go back to the original BSL and please extend that line into '98. In this case, it's simply a matter of a couple of $'s and the difference in support prices is minimal. My purpose here is to illustrate how the first support line, was in fact, the support for the stock as is plainly evidenced from 10/97-1/98. The stock is currently so far above either BSL that one can get a nosebleed just looking at the chart. My point being that, yes, a new BSL should be redrawn when broken to the downside. However, I believe one should not ignore a long term BSL that comes back into play by rising back above the BSL within a few months after a stock's broken support. If a stock has the gumption and strength to rally back above a trendline as important as the BSL, then it's my feeling that the support line should be recognized as support once again. I'll post other examples with different implications in the days ahead. Best regards, Bruce

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