P&F Chart School

[RPM]

James:

Thank you for this very clear explanation of this chart. I have been trying to read it through the various web sites, and not having much luck understanding it. Seeing you explain the chart as the market changes makes things a lot easier to understand.

I do have some questions on the current P&F charts of the following:

$INDU: "Descending triple bottom breakdown on Nov 20 2007" "Bearish price obj (rev??) met (12900)"
$NDX: "Bearish triangle breakdown on 20-Nov-2007"
"Bearish price obj (REV??) 1750"
$SPX:"Descending triple bottom breakdown on 20-Nov-2007" Bearish price obj (Rev.) 1350"

Can you explain what those mean in terms of the market? Also, I am guessing that Rev. means "reversed", but what does that mean exactly, again with respect to the market?

Thanks very much.

 

[Sunnyskies]

James, thanks for teaching about P&F charts. It's really helped.

I have a question -- what do the numbers/letters within the columns mean.

 

[RPM]

James, thanks for teaching about P&F charts. It's really helped.

I have a question -- what do the numbers/letters within the columns mean.

That one, I do know. 1 through C are the months of the year, 1=Jan, 2=Feb, etc... Since P&F charts are independent of dates, the date notations show when that part of the chart got started...

 

[James48843]

That one, I do know. 1 through C are the months of the year, 1=Jan, 2=Feb, etc... Since P&F charts are independent of dates, the date notations show when that part of the chart got started...

Correct-

1=Jan
2=Feb
3=Mar
4=Apr
5=May
6=Jun
7=Jul
8=Aug
9=Sep
A=Oct
B=Nov
C=Dec

The number or letter is where ever the price was on the LAST trading day of that month.

 

[James48843]

James:

Thank you for this very clear explanation of this chart. I have been trying to read it through the various web sites, and not having much luck understanding it. Seeing you explain the chart as the market changes makes things a lot easier to understand.

I do have some questions on the current P&F charts of the following:

$INDU: "Descending triple bottom breakdown on Nov 20 2007" "Bearish price obj (rev??) met (12900)"

Here is a great place to learn about all the different chart formations, and what they mean:

http://www.tradejuice.com/technical-analysis/point-figure-charts.html


Here is a triple bottom:

And here is a Triple Top

Patterns ar created by the movement of the share price within the range of existing data. If the price moves up or down MORE than three units of price, then you get a reversal signal (changing from O's (down) to X's(up).

But the pattern created is just one of the factors to consider.

When to Buy and Sell

When analysing the charts to determine the best time to buy and sell shares, the following criteria must be evaluated:

1. Patterns
2. Trend Lines
3. Market Indicators
4. Price Objectives (PO).


What you are asking about is the first criteria in determining when is a good time to buy and sell. It's 1. the pattern present. A good start is recognizing what the pattern present is. It can tell you where the stock has been. But by itself, it cannot tell you more than that.

So the answer to your first part of your first question, you ask: what is a "descending triple bottom breakdown"?

Answer: It means that it has hit at least two equal lows, (represented by the O's,) and then hit another, lower descending O.

 

[James48843]

Then you asked: What does this mean:

"Bearish price obj (rev??) met (12900)"

It means that the Bearish price objective (PO), which is what the chart HAD been predicting as the current bottom line, based on data, has been met.

"(rev.)" means Revised. They may have originally calculated a bearish price objective to the downside higher than where is it now, based on the FIRST triple bottom breakdown which occured earlier. Then, when the chart broke downward again, it created a new, revised lower level that the chart predicted it would go before turning around. That becomes the "Bearish price objective (revised) has been met."


Here is that chart, as of right this very minute (12:32 am.)

View attachment 2644

 

[James48843]

As you can see in that chart, we no longer have the informaton displayed about a triple bottom breakdown, instead it now says "no new P&F formation".

And since we have postive movement yesterday, you see the three green X's have appeared at the bottom right of the formation.

Since it already met the current forecasted bottom price objective (12900), you won't see anything more for a while, until the chart decides which direction it is going in. And since we are below a "Bearish Resistance Line" *(the red line on the top), the three new green X's are not yet considered a buy signal. Instead, we would have to wait until the X's are strong enough to generate a NEW blue Bullish Support line before reentering the market.

Hope that makes sense.

 

[James48843]

One thing to keep in mind about the buy and sell signals in a P&F chart.

They won't get you INTO the stock at the bottom. You have to wait until there is a clear trend before obeying the buy signals.

And they won't get you OUT of a stock at the absolute top. Again, they won't trigger a sell signal until after the crest has been reached, and they are on the way back down.

But what it CAN do is give you a way to get in, and then get out at a level higher than you got in at. And THAT is the way to be successful in the long run.


If they do in fact go through with this stupid trade limit of two per month, perhaps the P&F may be the ONLY way to make money.

We'll have to see.

 

[James48843]

OK- back to chart school.


RPM, you asked:

"$NDX: "Bearish triangle breakdown on 20-Nov-2007"
"Bearish price obj (REV??) 1750"


Ok- first, your symbol of $NDX had a bearish triagle.

There are two types of triagle formations: Bullish, and Bearish.

Both triangle formations consist of higher bottoms and lower tops, generally with all prices contained between the bullish support and bearish resistance lines. The signals for the triangle formations are the first Double Top or Double Bottom signals.


Here is what a Bullish triangle looks like:

And here is what a Bearish triangle looks like:

The Bearish Triangle Projected (and, in this case, again, revised) Price Objective (PO) is now 1750. They think that the price is headed down, and they predict the bottom will be somewhere around 1750 before things turn around.

That projection is based on the RATE of the stock's fall, as well as the suport levels previously seen in the stock. If there is a big, open gap down before you see a lot of sideways movement, you can expect the stock to fall quite a ways before it's going to level out. Not necessarily all the way down to the last suport level show on a conventional chart, because the longer a stock has been at higher levels, the less likely it is to fall a great deal. However, this is a calculation that takes both the past suport levels, and the sidways movement into account.

 

[James48843]

IN this case, your symbol $NDX, or the Nasdaq 100, is showing a brand new red Bearish Resistance Line above, it is in a downward spirial, (a new red O created today) and the new projected low that it will reach is down at 1750.

Today the index is at 2010, but the P&F chart says it may go down all the way to 1750 before hitting a reversal. That would be down to the levels of last March. Ouch.

If, however, we have some rebound action over the course of the next couple weeks, it COULD create a new, blue BULLISH SUPPORT LINE, in which case the price objective will change.

We'll just have to wait and see what happens.

 

[James48843]

And finally, RPM, you had your third index, The S&P 500, which stated on the P&F chart:

$SPX:"Descending triple bottom breakdown on 20-Nov-2007" Bearish price obj (Rev.) 1350"{/quote]

Again, it means that it is passing through a triple bottom formation, breaking downward, and that the new, revised lower Price Objective is now set at 1350. They think the chart is showing 1350 on the downside before reversal. That COULD change, but that is what it is saying right now.

Again, those are all instances of target prices based only on Patterns. The P&F chart uses more than just patterns, to figure out when to buy and sell.


1. Patterns - That's your "Triple Bottom Breakdown"



2. Trend Lines - Those are your Bearish Resistance Lines and Bullish Support Lines.

3. Market Indicators - This is wild card here- what outside influences are being down on the price. Is there a rate cut coming? War in the middle east? Price of Oil got people down? An election around the corner, and people have uncertainty over who will win?

4. Price Objectives (PO). This is the mechincal price the charts THINK the price will get to, before a major change in direction. One thing to remember is that the Price Objective is strictly based on where the stock has been, and what it is doing now, independant of any other stock indicator. That is why the S&P Price Objective can be telling us it is going down to 1350, yet other stocks may not be headed down so far. The P&F chart is ignorant of what stocks are the actual stocks which compose the S&P 500.

If you had the time, you COULD go out to each one of those 500 stocks, check THIER P&F chart Price Objectives, and probably would find a much different number if you totaled them all up .


But then again, sometimes it's just easier to sit back in the G fund and watch things go south.

That's enough P&F Chart School class for today. MY head hurts from seeing all the red once again in the market. We'll pick up some more another day.

Class dismissed.

 

[RPM]

James

Thank you very much for the excellent teaching. I do have another question, for another day of teaching:

What is a "high pole warning"? I think it might be on the $MSEAFE P&F chart.

Happy Thanksgivings!

 

[Sunnyskies]

Thanks RPM and James.

 

[presskh]

Nice call on the market, James. Thanks for the very informative thread. Have a nice Thanksgiving!

 

[James48843]

James

Thank you very much for the excellent teaching. I do have another question, for another day of teaching:

What is a "high pole warning"? I think it might be on the $MSEAFE P&F chart.

Happy Thanksgivings!

RPM-

Go back and look at the chart again now. Today's close makes it is triple bottom breakdown.

http://stockcharts.com/def/servlet/SC.pnf?c=$MSEAFE,P&listNum=

And in just a second here- I'll explain what a "high pole warning" is.

(Got to go get a graphic ready for you.)

 

[James48843]

The high pole warning is given when a chart rises above a previous high by at least 3 boxes but then reverses to give back at least 50 percent of the rise. The reversal implies that the demand that was making the prices rise has given way to supply pressure. The pattern is a warning that lower prices could be seen in the future.

View attachment 2645

 

[RPM]

The high pole warning is given when a chart rises above a previous high by at least 3 boxes but then reverses to give back at least 50 percent of the rise. The reversal implies that the demand that was making the prices rise has given way to supply pressure. The pattern is a warning that lower prices could be seen in the future.

(How do you do a table in this message board?)

James,

Thanks, it was on SPY that I saw that warning. As to the MSEAFE, why does it say 20-Nov when it's actually today that the breakdown occurs? I don't remember seeing it yesterday...

As to attaching table, maybe just do a table and attach file like any other attachment, using the clip icon above for .doc (if table is in Word).

Again, thanks very much for all your teaching. I also stay out of the market, since I started looking at the charts, and all of them have downward signs on the indicators that I follow (mainly SLO STO, daily and weekly). I am also weary about being one of the 3000 "daytraders" who will be getting the TSP letter

Happy Thanksgiving!

 

[James48843]

RPM:

First, never ever give in.

They haven't changed the regulation yet. It is up to us to rally enough pressure to stop the change.

It can be done. We just have to set our minds to it.

Apply pressure. This is the government of the people, by the people, for the people. Do not let it perish from the earth.

Apply pressure. Demand that they do not make this change.

I know I am going to.

Will you do your part?

Flood the TSP's phone line.

Flood Saul's Congressional Campaign office phone voice mail.

tell them all NO - NOT WITH MY MONEY YOU DON'T!

 

[hessian]

Hi James,
Classes working well so far it seems (maybe getting ahead a little - re: class101, but I expect it cant be helped), but interest is sure gaining!! Highly recommended!!!

Gonna try your atachment:
1. Below select > "Manage Attachments" , > select .jpg, .bmp, whatever, then select > browse, to find the file on the computer. (- me, I place on my desktop so I can find 'em easy).
Then select > upload the file.

NEXT, click on/select > the paper clip (or use its down arrow) - in the tools at the top/above the "reply window," and select "ADD", and that's it... You will see [ATTACH ####[/ATTACH] - until you hit the "Submit Reply" button. (make sure it has at least one a line by itself)
View attachment 2648
BTW please let me know - is the $MSEAFE or the $EFA the correct chart to be using for the "I" Fund??
VR

 

[James48843]

Got it to work- Thanks Hessian.


Here is the Triple Bottom attachment. Let's give this a shot:

View attachment 2650