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Thread: P&F Chart School

  1. #1

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    Default P&F Chart School

    One of the members asked to explain a little more about P&F charts. I have commented about using P&F charts in my acocunt thread, and some people were asking me questions about my comments- so I figured I'd start a new thread to become P&F Chart School.

    P&F stands for Point and Figure, and if you have ever used one of these types of charts, you'll know it is a little different that the conventional ones you'll see on most sites.


    Here is an example of a Point and Figure chart- this one of the S&P 500:

    Attachment 2588
    Last edited by James48843; 11-17-2007 at 03:21 PM.


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  3. #2

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    Default Re: P&F Chart School

    What makes P&F Charts different is that is shows trends, without regard to time. By that I mean that it shows the ups and downs, and it doesn't matter if it was up over a three-year period or a three day period, the left-to-right has no real connection to time. It IS marked with dates, but they don't have to be equal horizontally. For example, in the chart above, the years of 2005 and 2006 are shown, but you see the year 2007 has more ups and downs that the previous two years, therefore it is extending out to the right more.

    First point: P&F charts show upward and downward move trends, not linear time.

    The BEST place for learning the basics is this website at this link: For more in-depth reading, see: http://www.tradejuice.com/technical-...re-charts.html

    There you will find a much better school than I can offer here- as they explain the X's and O's with tables, and I haven't yet figured out how to place HTML tables within this TSPTALK boards.
    Last edited by James48843; 11-17-2007 at 01:08 PM.

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  5. #3

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    Default Re: P&F Chart School

    X's simply represent when the stock is moving in a postive fashion.

    O's simply represent when the stock is headed down.

    BUT: A column of X's only becomes a column of O's when you've retraced a significant amount. You can have a little fall back, and not get the reversal signal to change from an "X" to an "O".



    From "Stockcharts.com":

    Here is the best explanation of how P&F charts work. I tried to cut and paste from here, but without success. My advice is to take a few minutes, and read, and digest, this:

    http://stockcharts.com/help/doku.php...ing_pnf_charts




    POINT TO REMEMBER: Is it important to remember that P&F charts do not show time in a linear fashion. Each column can represent one day, or many days, depending on the price movement. Because P&F charts filter out the noise associated with more traditional charting methods, every mark on the chart is significant.

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  7. #4

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    Default Re: P&F Chart School

    I was asked "What do the numbers in red mean on the right hand side of the chart?"

    Answer: You'll see two numbers there. The first one in this particular chart is red at 1458.7. That number represents exactly where the stock price is now, at the time the chart was created. In this case, the chart was made at the close of business on November 16th, when the S&P500 was at 1458.74.

    The second number you see lower is 1350.0 PO.

    PO stands for "Price Objective". That is the point that the chart is predicting to go before things turn around. If the chart presumes the trend is down, it is how far down before you meet your price objective, and either "sell", or change direction. And if the predicted price objective is lower, the color will be RED.

    If the price objective is higher, the number will be GREEN rather than red.

    POINT: P&F Charts can help you decide whether to be an active trader on the rebounds, or to sit out of the market altogether. Right now it is telling it that it looks like the S&P may have a long way down before reversal. But it also allows us, if we so choose, to try and capture the upswings in volitility (knife catching). The Price Objective points help us figure out if we are changing directions in trend.
    Last edited by James48843; 11-17-2007 at 03:24 PM.

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    Default Re: P&F Chart School

    BLUE LINES: The blue line underneath is a kind of a long-term trend. Kind of like the 200-day moving averages on regular charts, but not exactly. The formal name for the heavy blue line is:

    THE BULLISH SUPPORT LINE.

    The thing to remember is that when signals appear ABOVE the bullish support line, they mean something different than if the signal appears BELOW the bullish support line. More on that later. That info is for about P&F Chart Class 303, and we're still dealing with 101 here. Any sell signals given above this line should be disregarded. This means the share should not be sold until the first sell signal after the bullish support line has been penetrated.

    If the blue line (BULLISH SUPPORT LINE) is broken downward, however, a red line appears over the top side, trending down. Red lines show negative trends.

    Officially, the red line is called a BEARISH RESISTANCE LINE.

    Any buy signals given below this line should be disregarded. This means shares should not be purchased until the first buy signal given after penetration of the bearish resistance line.

    Other than those two terms, the P&F chart opens up a whole new world of ways to look at things. You are looking at exactly the same price amounts of stock shares, but now you are looking at them in terms of overall trends, and where they are in relationship to where they have historically been, instead of simply looking at the ups and downs of candlestick linear charts.

    Are P&F charts THE solution?

    Nope. Not at all. They can't change world hunger, or war, or save us from the sub-prime fiasco.

    But the DO add a whole new dimension for HOW to look at what you are seeing, and then serve as an additional data point from which to make YOUR OWN decision.

    I won't tell you when to buy or sell. YOU have to make your own decision on that.

    But YOU can learn a whole lot more when your world opens up and you see new tools to understand.
    Last edited by James48843; 11-17-2007 at 03:19 PM.

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  11. #6

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    Default Re: P&F Chart School

    That's all for now. This is lesson one. There is much more to come in the days ahead, but I've got to go now.

    Go read those several links I posted above, and you'll learn a lot more about P&F charts. It's well worth the read.


    P&F charts were created a long time ago, before the age of computers. Anyone with a simple piece of graph paper could create one with the morning newspaper stock price quotes, and a pencil, and update them on a daily basis in a few minutes. When computers came along, people had new and more indepth knowledge, and could create all kinds of charts, and P&F charts kind of fell out of favor.

    But P&F charts are now being "rediscovered" by a new generation. And they can help you clear the clutter of the day-to-day swings, and see things in a new perspective. I only discovered them about a year ago, but I have learned already that they can become very valuable when the market starts swinging all over the place.

    Good luck, and happy investing.

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  13. #7

    Default Re: P&F Chart School

    James I haven't had the time to read your new thread in detail, but it is great. Keep up the fine work.

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  15. #8

    Smile Re: P&F Chart School

    Quote Originally Posted by airlift View Post
    James I haven't had the time to read your new thread in detail, but it is great. Keep up the fine work.
    Agree - thanks for taking the time to create this link. It is very interesting and informative and we appreciate your time and effort.

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  17. #9

    Smile Re: P&F Chart School

    Thanks James!


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  19. #10

    Default Re: P&F Chart School

    Hi James,
    Nice school. Started the "mandatory" reding for "clasa 101" - not so bad (its short/easy). I find you don't need to lear Ever detail, but its background for what going to come/what you'll be showing us. Congrats! Anyway, have a great vaction and look forwrd to return, for when you're ready to sart of "class 202".
    VR

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  21. #11

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    Default Re: P&F Chart School

    Hessian:

    I wrote extensively last night and this morning in my account talk thread. the breakdown below 1440 on the S&P just resulted in a big red bearish resistance line appearing this morning.

    So I am licking my wounds, and moving totally over to a 50/50 mix of G and F, until things settle down, and I have a chance to think about my losses, and reasses when and where I want to get back in.

    I'm out of the markets as of today.

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  23. #12

    Default Re: P&F Chart School

    Hi James,
    Yes, I saw the p&f chart red Bearish Resistance Line form too, it looked real ugly - glad to have you confirm!!!! (BTW, I did also see your "Talk Forum" posts too).

    I made it out too!
    I think I may need a stiches, maybe turniket (sp?) for my wounds.
    Oh well, I guess we see how far this goes, I guess now expect quite a ways! I'll listen for a "clank" of when the bottom hits, or maybe a "spash."
    By then, I should be healed up OK, and then By back in to make up losses - and then some!
    That's the way its supposed to work anyway, right?

    But seriously, by the p&f charts, maybe it would be good to post what we all should look for as the new "real" bottom (vs maybe if you can tell just a temporary "buy" correction in the p&f charts)...

    Anyway, thanks again the confirmation, and for helping me out (literally)!
    VR

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