Good morning, leslie jo. Here's Michael Burke's definition of a Bullish Resistance Line (brl - small caps because of the secondary status of the trendline) from his book "The All New Guide to the Three Point Reversal Method of Point & Figure Construction and Formations". This was the first book that I read in my p&f education and also one of the best manuals you'll find on p&f charting:
"Bullish Resistance Lines can be drawn any time there is a wall of O's with at least two O's above the highest X in the next column......"
O
O <----
O X
O X O
O X O
O X O
O X
O
Any time you see two O's peaking above the very next column of X's, you can begin drawing in your brl right there. Burke goes on to say the following:
"The first one, all the way on the left, is always the one which should be given most credence because it comes at the very end of the base."
So as you move backward in price history on your p&f chart, the brl's that you are able to draw carry additional weight and will give you further, longer term, upside targets for which the stock can shoot for.
More from Burke:
"The penetration of the first brl may be used as a new buy signal."
"Bearish Resistance Lines are also very useful to use as potential price objectives or areas to be concerned about possible terminations of the upmove."
Let's go hunting for brl's on ckfr's chart. The first brl we can draw in is in the September column of X's. Start your brl at $13, right above the top X in that column. Move up one box and over into the next column to draw the second part of the brl. The next notation for the brl is interrupted by a rising column of X's and would effectively end the "official" validity of that trendline, HOWEVER, as Burke states:
"Once drawn, the relevant lines may be extended to the right as the stock moves up. This is important, even after they are broken because they often become minor support lines when the stock reverse downward."
So I always continue drawing my brl, even if they are interrupted, but that's another lesson for another time. Back to CKFR. Moving to the left, the next brl that can be drawn in is above the column of X's after the January O column. You would begin drawing in the brl at $26, right in that little nook above the highest X which is $25. That brl is now at $46, and should the stock's trend turn bullish, that would be an intermediate to longer term price target you would look for.
The brl is not the key element to understanding CKFR's current p&f chart, however. As Chartseer so ably pointed out, the Bearish Resistance Line (BRL - capitalized because of it's primary status on a p&f chart) is the key to the understanding the chart. A move to $22 would turn the stock's main trend from bearish to bullish because the stock's RS is already in X's and most importantly, would take out the BRL. An even stronger bullish trend for the stock would be if the stock was on an RS Buy signal AND in X's, however, in the case of CKFR, I'm sure the majority of the upmove would be over and done with by the time the stock gave an RS buy signal.
Hope this has been of some help.
Take care,
Bruce |
