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Strategies & Market Trends : Trade/Invest with Options Jerry a Point & Figure Chartist -- Ignore unavailable to you. Want to Upgrade?

To: Frederick Langford who wrote (4959)	1/29/2002 3:42:38 AM
From: Smooth Drive	Read Replies (3) \| Respond to of 5893

Fellow P&F nuts, The attached article was recently e-mailed to me. He said it's from John Murphy. Now -- I'm not familiar with his site and don't know if this is OK to display or not. So if it is OK, then cool. If it's not -- I'm very sorry, please PM me and I'll have it removed -- and I swear I'll never do it again<g>. GOOD ALTERNATIVE... Last week, we referred to point & figure charting available on StockCharts.com --a charting website that you can reach right from our site -- at no extra cost. I'd like to elaborate further on that old -- but valuable -- form of charting that has recently gained new popularity. "Bar" charting is still the most widely used form of charting. "Candlestick" charting has gained a following in recent years. Point and figure charts were used in the western world before either of those other methods (although candlestick charts have been used in Japan for three centuries). P&F charts date back over a century and were the original form of "tape reading". In my book Technical Analysis of the Financial Markets, Chapter 11 is devoted to that more intricate form of charting. If you have access to that book, you can use that chapter to learn the advantages of p&F charting and how it's done. If not, you can go right to the Stochcharts.com website. NASDAQ P&F CHART... From our main page, click on "Links" and then StockCharts.com to get to that free charting site. If you haven't already done so, you're in for a real treat. It's a chartist's dream. For instance, here's a link to their latest newsletter. Read the portion entitled "Point & Figure Analysis". The newsletter shows the current P&F chart for several of the major stock averages. The Nasdaq chart shown below is the first one on the list. Notice the alternating column of x's and o's. The x column represents rising prices, while the o column represents falling prices. In its simplest form, a "buy" signal is given when a column of x's exceeds a previous column of x's; a sell signal (which was the latest given) occurs when a column of o's falls under the previous column of o's. In order to reverse direction by moving to the next column, at least three boxes in the opposite direction must occur (which is why it's called the "three-box reversal method"). In this example, each box is worth 50 points. That number can be changed, however, to increase or decrease the sensitivity of the chart. On this type of P&F chart, down trendlines are drawn at 45 degree angles. To signal an uptrend, prices must exceed the latest down trendline (and exceed a previous column of x's). UNDERSTANDING POINT & FIGURE CHARTING... Here's a link to StockCharts.com's "Understanding Point & Figure Analysis". That educational article with give you a history of the technique, will explain how to create them, and explains simple P&F patterns as well as support and resistance levels and trendlines. It also explains things like "interactive" P&F charting, box scaling, and how to use log charts. Once you understand the technique, you can change any chart on Stockcharts.com (even mutual fund charts) into point & figure charts. MAIN ADVANTAGE... The main advantages of P&F charting (in my opinion) are their precision and discipline. Buy and sell signal are much easier to spot. They also filter out most of the market noise and record only the actual price changes. If no price change occurs, nothing is recorded. They're pure price charts. At times like these when the noise level is deafening, P&F charts help keep us focused. I highly recommend that you take the time to study these charts. They can add a valuable dimension to your charting.