Since I've written in the past about High Pole Tops (HPT), I just wanted to reiterate the importance of pattern recognition and hopefully, how it can save you some money. Also, to introduce a pattern that hasn't been discussed, but people should be aware of what it is, the High Pole at the Bearish Resistance Line (HPB).
If anyone has access to US Air's (U) p&f chart, please take a look. This pattern has the same characteristics that an HPT does (See previous posts for explanation). The basic distinction is the current column of X's penetrates a Bearish Resistance Line (BRL) on the way up. On the subsequent reversal, the stock retraces more than half of the up column and gives a HPT pattern. This time, though, comes the added danger of crossing over that downtrend line on the way down. Michael Burke always points out in his writings that this was a favorite short sale formation of the late Earl Blumenthal, a p&f innovator. Anyway, spotting potential HPB's can probably save money and aggravation if you can recognize the pattern by looking a move or two ahead. That's one of the fun things about p&f.
Take a look at what happened to U when it last had a HPT in April at $75. The stock then proceeded to give a double bottom sell at $69 and you were left holding the bag on a move to $64. With the market in bear alert mode and a bear confirmed market not too far away, that's not another ride I want to take.
Getting back to the HPB, the stock is currently on a run of 11 straight X's up after a Triple Top buy at $70. It broke through the BRL from the $82 high at $76. Should the stock reverse from here and move to $72, a 50%+ retracement would have occurred and you would have your HPB.
I have my stop right at $72 and I'll be out of the position should the stock reverse course and hit that number. The great thing about p&f is that you are provided with a definite game plan and a specific course of actions to take at specific prices. The beauty of point & figure is in it's simplicity. Much of the guesswork is eliminated as well as a lot of the emotion. Along with the decision making process also comes the feeling that you're doing the right thing. The trades don't always work out. The satisfaction comes in the stacking the odds in you favor and in the discipline of following a proven method that works. Shortly thereafter come peace of mind and hopefully, making a few dollars in the process.
Peace of mind and the High Pole at the Bearish Resistance Line. An unlikely combination, but an apt one for today.
It's raining in New York, has been all weekend. One of my little guy's (2 year old Stephen) is taking a nap and that sounds like a good idea. You know he's going to wake up as soon as my head hits the pillow.
Best to all and watch out for those HPB's.....
Bruce |
