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Strategies & Market Trends : Point and Figure Charting

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To: The Jedi who wrote (3486)	6/9/1998 6:55:00 PM
From: Bwe	Read Replies (2) of 34811

Hi Kiri.....A High Pole Top is a dangerous formation at this particular juncture in the market. With the NYSE bullish % in bear alert status, stocks that fall into high pole tops should be watched very closely. First an explanation of a high pole formation is in order. High Poles occur when a stock has an upside breakout and a column of X's exceeds the previous column of X's by at least 3 X's. This is the "pole". The following column of O's then retraces more than 50% of the advance from the previous column. WLA moved in a column of X's from $56-68, a total of 13 boxes in the column. This column of X's now qualified as a "pole" because it exceeded the previous column of X's by 7 boxes. What your looking for now is to see if the stock retraces a total of 7 boxes. 6 is not enough as it down not qualify for the 50% retracement. It must be 7 in this case. Well, WLA retraced 8 boxes, moving to $60. The high pole top occurred at $61. This formed the high pole top. Chartcraft takes high poles very seriously. They have found that these patterns lead to moves below a previous bottom 80% of the time. One big advantage in recognizing this pattern is it allows you to take action BEFORE the actual sell signal takes place if you're so inclined. Often times, depending on how long you've been in the stock and other market factors, investor's will place a stop at the price level where the high pole would be formed. There are other factors to consider. A stock's relative strength should be a prime consideration. WLA gave a RS buy in March '98 and that suggests a period of out performance for some time to come. The market's bear alert status and WLA's sector which is bear confirmed should also be part of the thought process. Trend lines should be used as well. Throw it all together and I come up with a buy on weakness for the stock. The 10 week MA is at $61 and I see this high pole as a warning and not as a final top being put in by the stock. I would let the stock come to me, but I would be a buyer, not a seller, in the low $60's. Take care, Bruce

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