Point and Figure Patterns

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Hace algúnos días "elabuelo" inició en nuestro foro un hilo (http://centrader.net/phpBB/viewtopic.php?

t=57) que
consideramos muy interesante, en torno a los gráficos de punto y figura y su utilización en el análisis y elaboración de
estrategias de trading. Hoy nos envía este artículo que seguro resultará "sabroso" para todos aquellos que deseen ampliar
conocimientos sobre tan interesante instrumento.
Un saludo.

Point and Figure Patterns


Overview
Point and Figure charting
differs from other charting techniques by the fact that it only requires price
for analysis, not
time. It is also plotted differently by using columns and
rows using price movement only.

Point and Figure was


developed towards the end of the nineteenth century. This new form of charting
was referred to as
the "book method". The book method was applied by
entering the actually prices into the rows and columns however
this proved to
be not very popular since it was time consuming to enter the entire price. It
was upgraded by the early
twentieth century into point and figure. Unlike the
book method, point and figure uses the symbol X or O to describe the
price
movement rather than writing the entire price into the field.

There is also a
significance given to the number three in point and figure charting. When
movements hit the support or
resistance line, extra attention should be spent
on the third collision. There is also quite a few patterns where the third hit
is when the signal is generated.

Due to the accuracy of the


signals provided by point and figure charting, interest in this form of
analysis is continuously
growing.

Point and Figure patterns


can be categorized by "bearish", "bullish", "reversal", and "wait and see" (trend continuation).

Bullish Point and Figure Patterns


Triple Top

The pattern is formed by


three rallies (1,2,3), on the third rally it
pushes past the resistance line
formed by the first two.

The third column will


rise past the resistance line an equal
distance to that of the bottoms.

Breakout of a Spread
Triple Top

This pattern is a variation


to the triple top except that on the third
rally
it fails to reach the resistance
line. On the fourth move it
breaks past the resistance line and should rise
an equal amount to
that of it's bottoms.
Ascending Triple Top

Another variation of the triple top except in this case each


consecutive
top is higher than the last.
However this pattern does
not give a price
objective like the triple top. The signal in this
variation is to buy on the breakout.

Upward Breakout of a
Bullish Resistance Line.

A variation of the ascending


triple top except in this case there
is
a fourth consecutive top is higher than the last.
The signal in this
variation is to buy on the breakout.

Upward Breakout of a Bearish


Resistance Line.

This pattern consists


of a consecutive series of lower highs.
When the price breaks through the resistance
line a buy signal is
given.

Bullish Trend Reversal


Patterns
Inverted Head and
Shoulders Pattern

The inverted head and


shoulders pattern is
found in candlestick, point and figure, and
chart
patterns and is considered one of the
most reliable reversal patterns.

The price forms a low on


column one,
followed by a period of consolidation. A
second low is created
followed by another
period of consolidation, the right shoulder
is then
formed followed by a buy signal as
it crosses the neckline.

Parralel support and resistance lines can


be
drawn as well as a visible neckline.

The height of the lowest


low should give a
projection of the strength of the upward
move.

Triple Bottom

The triple bottom is a variation


of the inverted
head and shoulders pattern. This pattern
consists of three lows
of similar height. After
the third
low is formed and the price
movement breaks the neckline, a bullish
signal is given. The expected
rise should be of
similar height as from the neckline
to the low.

Double Bottom

The double bottom is


a variation of the triple
bottom pattern. This pattern consists of two
lows
of similar height. After the second
low is
formed and the price
movement breaks the
neckline, a bullish signal is given. The
expected
rise should be of similar height as
from the neckline
to the tops. It is important
to note that before the
breakout, the trend line
is broken.
Bullish Rectangle
Reversal

The downtrend forms a


clear period of
consolidation, the resistance line is then
broken on a heavy volume day, it
is at this
point where the
bullish signal occurs.

Bearish Point and Figure Patterns


Triple Bottom

The pattern is formed by


three downs (1,2,3), on the third drop it
pushes past the support line formed
by the first two.

The third column will


drop past the support line an equal
distance to that of the tops.

Breakout of a Spread
Triple Bottom

This pattern is a variation


to the triple bottom except that on the
third rally
it fails to breach the support
line. On the fourth move
it
breaks past the support line and should drop
an equal amount
to that of it's tops.
Descending Triple Bottom

Another variation of the triple bottom except in this case each


consecutive
low is lower than the last.
When the price drops
below
the support line this generates
a clear selling signal.

Downward Breakout of a
Bearish Support Line.

A variation of the descending


triple bottom except in this case
there
is an upward bias. The signal
is to sell on the support line
breakout.

Downward Breakout of a
Bullish Support Line.

This pattern consists


of a consecutive series of higher lows.
When the price breaks through the support
line a sell signal is
given.

Bearish Trend Reversals


Head and Shoulders

The head and shoulders


pattern is found in
candlestick, point and figure, and chart patterns
and is
considered one of the most reliable
reversal patterns.

The price forms a high on


column one, followed
by a period of consolidation. A second high is
created
followed by another period of
consolidation, the right shoulder is then
formed
followed by a sell off. High volume should be
seen on the last
downward move.

Parralel support and resistance lines can


be
drawn as well as a visible neckline.

The height of the highest


high should give a
projection of the drop of the final downward
move.

Triple Top
The triple top is a variation
of the head and
shoulders
pattern. This pattern consists of
three peaks
of similar height. After the third
peak is formed and the price
movement
breaks the neckline, a bearish signal is given.
The expected
drop should be of similar height
as from the neckline
to the tops.

Double Top

The double top is a variation of the triple top


pattern. This pattern consists of two peaks
of
similar height. After the second
peak is
formed and the price
movement breaks the
neckline, a bearish signal is given. The
expected
drop should be of similar height as
from the neckline
to the tops. It is important
to note that before the
price drop, the trend
line
is broken.

Bearish Rectangle
Reversal

The uptrend forms a clear period of


consolidation, the support line
is then broken
on a heavy volume day, it is at
this point
where the bearish
signal occurs.

Point and Figure Patterns


Trend Reversal Patterns
Head and Shoulders

The head and shoulders pattern


is found in
candlestick, point and figure, and chart patterns
and is
considered one of the most reliable
reversal patterns.

The price forms a high on


column one, followed
by a period of consolidation. A second high is
created
followed by another period of
consolidation, the right shoulder is then
formed
followed by a sell off. High volume should be
seen on the last
downward move.

Parralel support and resistance lines can


be
drawn as well as a visible neckline.

The height of the highest


high should give a
projection of the drop of the final downward
move.

Inverted Head and Shoulders Pattern

The inverted head and


shoulders pattern is
found in candlestick, point and figure, and
chart
patterns and is considered one of the
most reliable reversal patterns.

The price forms a low on


column one,
followed by a period of consolidation. A
second low is created
followed by another
period of consolidation, the right shoulder is
then
formed followed by a buy signal as it
crosses the neckline.

Parralel support and resistance lines can


be
drawn as well as a visible neckline.

The height of the lowest


low should give a
projection of the strength of the upward move.

Triple Top

The triple top is a variation


of the head and
shoulders
pattern. This pattern consists of
three peaks
of similar height. After the third
peak is formed and the price
movement
breaks the neckline, a bearish signal is given.
The expected
drop should be of similar height
as from the neckline
to the tops.

Triple Bottom

The triple bottom is a variation


of the inverted
head and shoulders pattern. This pattern
consists of three lows
of similar height. After
the third
low is formed and the price
movement breaks the neckline, a bullish
signal is given. The expected
rise should be of
similar height as from the neckline
to the low.

Double Top

The double top is a variation of the triple top


pattern. This pattern consists of two peaks
of
similar height. After the second
peak is
formed and the price
movement breaks the
neckline, a bearish signal is given. The
expected
drop should be of similar height as
from the neckline
to the tops. It is important
to note that before the
price drop, the trend
line
is broken.

Double Bottom

The double bottom is


a variation of the triple
bottom pattern. This pattern consists of two
lows
of similar height. After the second
low is
formed and the price
movement breaks the
neckline, a bullish signal is given. The
expected
rise should be of similar height as
from the neckline
to the tops. It is important
to note that before the
breakout, the trend line
is broken.

Bearish Rectangle
Reversal

The uptrend forms a clear period of


consolidation, the support line
is then broken
on a heavy volume day, it is at
this point
where the bearish
signal occurs.
Bullish Rectangle
Reversal

The downtrend forms


a clear period of
consolidation, the resistance line is then
broken on a heavy volume day, it
is at this
point where the
bullish signal occurs.

Point and Figure Patterns


"Wait and See"
Patterns
Flag

This pattern shows a large gain, followed


by a period of consolidation. It then breaks
past the resistance line. The height
of the
new breakout should be similar to that of
the opening
move in the pattern.

Inverted Flag

This pattern shows a large drop, followed


by a period of consolidation. It then breaks
past the support line. The height
of the new
fall should
be similar to that of the opening
drop
in the pattern.
Pennant Pattern

This is a variation of
the Flag pattern except
for the structure
of the consolidation. In this
case it is triangular. The breakout should also
have
large volume and the height
of the new
breakout should be similar to that of the
opening
move in the pattern.

Inverted Pennant
Pattern

This is a variation of
the Inverted Flag
pattern except for the
structure of the
consolidation. In this case it
is triangular.
The downward
breakout should also have
large
volume and the height of
the
downward breakout should be similar to
that of the
opening move in the pattern.
Bullish Breakout of a
Symmetrical Triangle

This pattern is similar the


pennant pattern except it does
not have a "pole". This pattern is rather unreliable and
there is real bias to the direction it may actually
take.
False breakout's in this case may also
occur so look for
large volume
to accompany the breakout.

Bearish Breakout of a
Symmetrical Triangle

This pattern is similar the


inverted pennant pattern
except it does not
have a "pole". This pattern is rather
unreliable and there is real bias to the direction
it may
actually take. False breakout's in this case may
also
occur so look for large
volume to accompany the
move..
 

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