Hi Nancy,
Just meandering through the last few days of posts and see no one answered your question about vertical count. Shame on us. Since I'm preparing some notes for a stock club presentation on this subject, I'll provide some of that info. However, I'll be using charts with the class and I don't have the capacity to scan them. We'll have to improvise.
Most Point & Figure (P&F) folks use a vertical count system as taught by either Mike Burke or Tom Dorsey, or an esoteric combination of the two. The authors memorialized their systems in their respective books. They have similarities but yield different results. I have looked at thousands of charts via Chartcrafts monthly chart book, quarterly options book and annual chart book doing a vertical count analysis (and horizontal count too, but that's a different story) and concluded that I was most comfortable with Burke's system.
What I did was go to the far left of the chart (oldest) on the referenced books, then follow the signals, do the math, and see what ones worked best. Burke's just seemed to hit most often and be the more conservative. I didn't track the Burke versus Dorsey hit miss counts, by how much, variance, standard deviation, etc. But, perhaps I should have. It wouldn't have taken that much more time. Might be an interesting experiment for this thread and might prove my instincts wrong. However, since I'm teaching this to the investment club, I get to teach any damn system I like best.
First, some ground rules as follows:
A. All P&F charts are either on a buy or a sell signal. (That is one of their many strengths.)
B. Buy Signal: Occurs when a column of X's moves one or more boxes (or levels) above the previous column of X's.
C. Sell Signal: Occurs when a column of O's moves one or more boxes below the previous column of O's.
D. If the most recent signal is a buy, you will have a Bullish Price Objective.
E. If the most recent signal is a sell, you will have a Bearish Price Objective.
OK, so you've got the chart in front of you, here's what you do.
BUY SIGNAL
1. Look for the most recent signal. (Assume it's a buy, and we'll call it the "Bullish Buy Signal".)
2. Next, from this current Bullish Buy Signal, scan back on the chart until you find the first sell signal (column of O's moving one or more boxes below the previous column of O's). We'll call this the "Bullish Sell Signal". Assume that the lowest O in this Bullish Sell Signal drops down to the $45 box.
3. Go to the column of X's directly to the right of the Bullish Sell Signal, and we'll call this the "Bullish Count Signal".
4. Count the number of X's in the Bullish Count Signal (assume there are 7).
5. Multiply the total X's in the Bullish Count Signal times 3 (7 * 3 = 21).
6. Multiply that product times the box size (21 * 1 = 21).
7. Add that product to the dollar value of the lowest O in the Bullish Sell Signal (45 + 21 = 66).
8. In your notes you would put -- Bullish Price Objective: 66
SELL SIGNAL
1. Look for the most recent signal. (Assume it's a sell, and we'll call it the "Bearish Sell Signal".)
2. Next, from this current Bearish Sell Signal, scan back on the chart until find the first buy signal (column of X's moving one or more boxes above the previous column of X's). We'll call this the "Bearish Buy Signal". Assume that the highest X in this Bearish Buy Signal rises to the $45 box.
3. Go to the column of O's directly to the right of the Bearish Buy Signal, and we'll call this the "Bearish Count Signal".
4. Count the number of O's in the Bearish Count Signal (assume there are 5).
5. Multiply the total O's in the Bearish Count Signal times 2 (5 * 2 = 10).
6. Multiply that product times the box size. (10 * 1 = 10)
7. Subtract that product from the dollar value of the highest X in the Bearish Buy Signal (45 - 10 = 35).
8. In your notes you would put -- Bearish Price Objective: 35
That's it. Works every time. A few asides as follows:
A. Say the lowest O on the Bullish Sell Signal comes down to 25. And the next (subsequent) column of O's also comes down to the 25. Then use this most recent column of O's as the new Bullish Sell Signal. The same approach applies to the Bearish Count Signal. (A picture here would do wonders.)
B. Vertical counts off the bottom or top are the most reliable.
C. Sometimes a Count Signal is incomplete. That is, there is no reversal from that column. That's OK, do the math anyway and consider it incomplete.
D. When the most recent signal is a Bullish Buy Signal, sometimes the Bullish Buy Signal and the Bullish Count Signal are the same.
E. When the most recent signal is a Bearish Sell Signal, sometimes the Bearish Sell Signal and the Bearish Count Signals are the same.
Box sizes (units of measure) work as follows:
0 to 5 = ¬ point (Each box is $.25)
5 « to 20 = « point
21 to 100 = 1 point
102 and over = 2 points
I glanced at Jan's vertical counts and she will have to explain her system.
Regarding Mr. D's system, in summary in starts with the same 1 and 2 from above, but his Count Signals don't occur until the actual buy or sell signal occurs. In addition, the final result is added or subtracted from the Count signals, rather than the buy/sell signals.
Let's use some of Jan's recent short suggestion charts as examples using Burke's vertical count method.
www3.techstocks.com
HRS
Bearish Sell Signal: 48
Bearish Buy Signal: Toped @ 55
Bearish Count Signal: Total of 6
Bearish Price Objective: 55 - (6 * 2)(1) = 43
VTA
Bearish Sell Signal: 53
Bearish Buy Signal: Toped @ 59
Bearish Count Signal: Total of 5
Bearish Price Objective: 59 - (5 * 2)(1) = 49
HBOC
Bearish Sell Signal: 56
Bearish Buy Signal: Toped at 63
Bearish Count Signal: Total of 6
Bearish Price Objective: 63 - (6 * 2)(1) = 51
And www3.techstocks.com
LLTC
Bearish Sell Signal: 69
Bearish Buy Signal: Toped at 81. Now see where the next column of X's also rose up to 81? That becomes our new Bearish Buy Signal.
Bearish Count Signal: Total of 5
Bearish Price Objective: 81 - (5 * 2)(1) = 71 (We have met the Price Objective. There is none at this time.)
JDEC
Bearish Sell Signal: 34
Bearish Buy Signal: Toped at 42
Bearish Count Signal: Total of 7
Bearish Price Objective: 42 - (7 * 2)(1) = 28
SNE
Bearish Sell Signal: 82
Bearish Buy Signal: Toped at 89
Bearish Count Signal: Total of 9
Bearish Price Objective: 89 - (9 * 2)(1) = 71
Now you do www3.techstocks.com
And www3.techstocks.com
If Jan puts up some charts with Bullish Buy Signals, we could do some Bullish Price Objectives.
Best way to learn? Order the current Chartcraft Point & Figure Chart book at (914) 632-0422. Tons of charts from the NYSE, ASE and NAZ. All have their current bullish or bearish price objective if applicable. Cost is $41.00
O my! So many words, and I wonder if it makes sense, since, cents?
Take care,
Eric
|
