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Strategies & Market Trends : Point and Figure Charting -- Ignore unavailable to you. Want to Upgrade?

To: R Stevens who wrote (4446)	7/5/1998 6:46:00 PM
From: Smooth Drive	Read Replies (2) \| Respond to of 34810

TO: Fellow P&F Hand Charters SUBJECT: BULLISH SUPPORT LINE (BSL) AND BEARISH RESISTANCE LINE (brl) REPOSITIONS HIGHER, LOWER AND SIDEWAYS Hope you all had a nice 4th. I just finished updating my hand charts and thought this subject might be of value as I haven't seen it discussed. So I'll bang away here and see if I can keep the mistakes to a minimum. In the recent past I took myself to task for not conducting certain trend line construction experiments (dealing with the FACTS system if you will) before memorializing an opinion. Accordingly, I've been conducting what for me has been a very interesting experiment with different trend line construction methods. The experiments are on going and far from complete. There are a couple of oddities that I now take for granted but perhaps some haven't noticed yet, or, find somewhat confusing. So I thought I would pass on two major oddities relative to the BSL and brl that occur on a regular basis but to date, I have not seen anyone write about or discuss. Before I start, a few definitions: A. Touch: A column of X's or O's Touches the BSL or brl, but does not penetrate. B. Ostensible Penetration: A column of X's or O's penetrates the BSL or brl by one or more boxes, but without exceeding the previous column of X's or O's. C. True Penetration: A column of X's or O's penetrates the BSL or brl by one or more boxes and has exceeded the previous column of X's or O's and thus has established a buy or sell signal. (Only true penetrations change a trend line from BSL to a brl, or a brl to a BSL.) {My my this does have an XXX ring to it.} The actual construction of the referenced trend lines is very well explained in Tom Dorsey and Michael Burke's P&F books. Reviewing those two books (which I recommend one read in near unison) will establish the how, when, where, etc part of trend line construction. (Actually one of the best things a newbie can do is go the DWA site and start pulling up charts. Observe how when the BSL is truly penetrated a new brl is established and when the brl is truly penetrated a new BSL is established. Back and forth it goes and then it's a snap.) >>>>FIRST ODDITY, the BSL is repositioned downward and the brl is repositioned upward if the there is a Touch or Ostensible Penetration to applicable trend line.<<<< 1. On DWA charts, the BSL will reposition itself lower by one or two boxes if a column of O's drops down and either Touches or Ostensibly Penetrates it and then reverses back up and forms an accumulation above the trend line. The repositioned BSL will form directly under the column of O's that Touched or Ostensibly Penetrated it. P&F Chart Examples at DWA: CHV: The BSL was Touched @ $77 in Oct of 97 and moved one box lower. FSS: The BSL was Ostensibly Penetrated to $18 in Nov of 95 and moved two boxes lower. GM: The BSL was Touched @ $54 in July of 97 and moved one box lower. IP: The BSL was Ostensibly Penetrated to $39 in March of 97 and moved two boxes lower. JNJ: The BSL was Touched @ $53 in Oct of 97 and moved one box lower. UK: The BSL was Touched @ $39 in Dec of 96 and moved one box lower. 2. Also on DWA charts, the brl will reposition itself higher by one or two boxes if a column of X's rises up and either Touches or Ostensibly Penetrates it and then reverses back down and forms an accumulation below the trend line. The repositioned brl will form directly above the column of X's that Touched or Ostensibly Penetrated it. P&F Chart Examples at DWA: BS: The brl was Ostensibly Penetrated to $15.5 in Feb of 96 and moved two boxes higher. FSCX: The brl was Touched @ $6.5 in Oct of 97 and moved one box higher. MDRX: The brl was Touched @ $50 in Feb of 97 and moved one box higher. UTX: The brl was Touched @ $79 in Dec of 97 and moved one box higher. Comment: I will assume that the DWA computer program was designed to do what it is doing. Jay Ball at DWA confirmed that what I have described is what actually happens but he didn't elaborate. I also discussed this with Mike Burke at Chartcraft and he said he wouldn't normally lower or raise a trend line because of a touch or ostensible penetration but he confirmed that one could certainly do this. Conclusion: The repositioning trend lines up or down was never discussed in any of the reading material that I have. Additionally, because of this repositioning, the trend lines on some of the stocks I hand charted were different than those at DWA, and this created somewhat of a pain. I eventually tired of the difference and acquiesced to following the DWA method. >>>>SECOND ODDITY, the BSL and brl will reposition themselves to the right if they are Ostensibly Penetrated and a group (accumulation) develops below the BSL or above the brl.<<<< 3. On DWA charts, the BSL will reposition itself sideways to the right if a column of O's Touch or Ostensibly Penetrate the BSL and at least one more column of O's Ostensibly Penetrate it and then there is a reversal and accumulation above the trend line. The repositioned BSL will usually form 2 to 4 columns to the right of where the BSL was first touched. P&F Chart Examples at DWA: ATHM: The BSL was Touched @ $33 in May of 98 and then Ostensibly Penetrated to $33 and $34. The BSL repositioned over four columns to the right. MLT: The BSL was Touched at $3 in June of 96 and then Ostensibly Penetrated to $3.25 and $3.25. The BSL repositioned over four columns to the right. PG: The BSL was Touched @ $81 in April of 98 and then Ostensibly Penetrated to $81 and $82. The BSL repositioned over four columns to the right. 4. Also on DWA charts, the brl will reposition itself sideways to the right if a column of X's Touch or Ostensibly Penetrate the brl and at least one more column of X's Ostensibly Penetrate it and then there is a reversal and accumulation above the trend line. The repositioned brl will usually form 2 to 4 columns to the right of where the brl was first touched. P&F Chart Examples at DWA: ALPH: The brl was Touched @ $15.5 in Oct of 97 and then Ostensibly Penetrated to $15 and $15. The brl repositioned over four columns to the right. GECM: The brl was Touched @ $13 in Feb of 98 and then Ostensibly Penetrated to $12.5 and $12.50. The brl repositioned over four columns to the right. XON: The brl was Touched @ $64 in Oct of 97 and then Ostensibly Penetrated to $64 in the next column of X's. The brl repositioned over two columns to the right. Comment: I will again assume the DWA computer program was designed to pick these items up and move the trend lines to the right. I discussed this Mike Burke and he said he also moves the trend lines to the right just as the DWA charts are moved to the right. Conclusion: On applicable hand charts I was not changing my trend lines because a True Penetration had not occurred. Hence, my trend lines were quite different than those at DWA. But, as above, I have changed and am now following the DWA and Chartcraft method of moving to the right. Wow! This is much longer than I anticipated. On a separate but related matter, I've slightly changed the name of the Bullish Resistance Line (BRL) and the Bearish Support Line (bsl) and --------- Oh! That's another subject. Take care, Eric