..... 73607280 ..............|.X...X+...O.OXOXO6OXOXO..........|...............|..... 72807200 ..............|.XOX.X.+....OXOXOXOXOXO..........|...............|..... 72007120 ..............X.XOXOX..+...OXOXOXOXOXO....B.....|...............|..... 71207040 ..............1OXOXOX...+..OXO.OXOX8XO....XO....|...............|..... 70406960 ..............XOXOXO2....+.O...OXO7O.O....XO....|...............|..... 69606880 ..............XOXO.O......+....OXO...OX...XO....|...............|..... 68806800 ..............XOX+.........+...O.....OXA..XOX.X.................|..... 68006720 ..............XOX.+.........+........OXOX.XOXOXOX...............|..... 67206640 ..............XOX..+.........+.......OXOXOXOXOXOX2..............|..... 66406560 ..............XOX...+.........+......OXOXOXOXOXOXO..............|..... 65606480 ..............XOX....+.........+.....O.OXOXO.OCOXO..............|..... 64806400 ..............XO......+.........+......O.OX..O.OXO..............|..... 64006320 ..............X+.......+.........+.......O.....OXO..5...........|..... 63206240 ..............X.+.......+.........+............O1O..XO..........|..... 62406160 ..............X..+.......+.........+...........O|O..XO..........|..... 61606080 ..............C...+.......+.........+...........|O..XOX.........|..... 60806000 ..............X....+.......+.........+..........|3..XOXO........|..... 60005920 ..............X.....+.......+.........+.........|OX.X6XOX.......|..... 59205840 ..............X......+.......+.........+........|OX4XO7OXO......|..... 58405760 ..............X.......+.......+.........+.......|OXOXO.OXO......|..... 57605680 ........X.....X........+.......+.........+......|OXOX..O8O......|..... 56805600 ........XO....B.........+.......+.........+.....|OXOX..O.O......|..... 56005520 ........7O9...X..........+.......+.........+....|OXOX....O............ 55205440 X.....5.XOXOX.X...........+.......+.........+...|OXO.....O......|.X... 54405360 XO....XOXOXOXOX............+.......+.........+..|O.......O......|.X4.. 53605280 XO2...XOXOXOXOX.............+.......+.........+.|........O....X.X.XO.. 52805200 1OXO..XOXOXOAOX..............+.......+.........+|........O..X.XOX2XO.. 52005120 .OXOX.XO6OXO.O................+.......+.........+........9..XOXOXO3OX. 51205040 .OXOXOXO.OX...|................+.......+........|+.......O..XOXOXOXOXO 50404960 .OXOXOX+.8....|.................+.......+.......|.+......O..XOCO1OXOXO 49604880 .OXOXO4.+.....|..................+.......+......|..+.....O..XO.O|OX5XO 48804800 .O.OXO+..+....|...................+.......+.....|...+....OX.X...|OXO.O 48004720 ...3X+....+...|....................+.......+....|....+...OXOX...|O...6 47204640 ...O+......+..|.....................+.......+...|.....+..OXOX...|....O 46404560 ...+........+.|......................+.......+..|......+.OXOB...|....O 45604480 .............+|.......................+.......+.|.......+OXO....|....O 44804400 ..............+........................+.......+|........OX+....|....O 44004320 ..............|+........................+.......+........OA.+...|....O 43204240 ..............|.+........................+......|+.......OX..+..|....O 42404160 ..............|..+........................+.....|.+......OX...+.|....O 41604080 ..............|...+........................+....|..+.....OX....+|....O 40804000 ..............|....+........................+...|...+....OX.....+....O 40003960 ..............|.....+........................+..|....+...OX.....|+...O 39603920 ..............|......+........................+.|.....+..OX.....|.+... 39203880 ..............|.......+........................+|......+.OX.....|..+.. 38803840 ..............|........+........................+.......+OX.....|...+. 38403800 ..............|.........+.......................|+.......OX.....|....+ 38003760 ..............|..........+......................|.+......OX.....|..... 37603720 ..............|...........+.....................|..+.....OX.....|..... 37203680 ..............|............+....................|...+....OX.....|..... 36803640 ..............|.............+...................|....+...OX.....|..... 36403600 ..............|..............+..................|.....+..OX.....|..... 36003560 ..............|...............+.................|......+.O......|..... 35603520 ..............|................+................|.......+.......|..... 35203480 ..............|.................+...............|........+......|..... 34803440 ..............|..................+..............|.........+.....|..... 3440--------------0---------------------------------0---------------0------------------0---------------------------------1---------------2-----
In a chart like the one above of the DAX, where bearish support lines lose significance afterstrong up moves, new starting points for support lines – on higher levels – are identified andused to draw the new line. In the DAX chart this had to be done 3 times until a support wasfound (highlighted) that defined price move with precision over a significant period.
100
Interpreting the Charts
Bearish resistance linesA bearish resistance line forms the top of a bearish channel and is drawn from the upper righthand corner of the highest X in a column of abnormally high Xs, down from upper left to lowerright at a 45 degree angle. The Hang Seng [HSI] and Sage Group [SGE.L] show such resistancelines. The examples also show how such resistance lines are redrawn, in the case of HSI lowerand in the case of SGE higher in January 2002.Chart 2.21 – Royal & Sun [RSA.L], with bearish resistance line
RSA.L / 3 box rev,/ 2001.03.26 to 2002.10.14560 ......................................|...................................................550 ____________X_____________________________________________________________________________540 ............7O........................|...................................................530 ....X.......XO........................|...................................................520 ....XO....X.XO........................|...................................................510 ....5O....XOXO........................|...................................................500 X_X_XO____XOXOX___X_______________________________________________________________________490 X4XOXOX.X.XO.OXOX.X9..................|...................................................480 XOXOXOXOXOX..OXOXOXO..................|...................................................470 XOXOXOXOXOX..8.OXOXO..................|...................................................460 XO.O.OXO6O.....O.O.O..................|...................................................450 X____O_O___________O______________________________________________________________________440 ...................O..................|...................................................430 ...................O..................+...................................................420 ...................O................C.X+..................................................410 ...................O............X.X.XO1O+.................................................400 ___________________O____________BOXOXOXO_+________________________________________________390 ...................O..........X.XOXOXOXO..+...............................................380 ...................O......X.X.XOXOXO.OXO...+..............................................370 ...................O......XOXOXOXO...O|O....+.............................................360 ...................O....X.XOXOXO......|O.....+............................................350 ___________________O__X_XOXO_O_________O______+___________________________________________340 ...................OX.XAXOX...........|O.......+..........................................330 ...................OXOXOXO............|OX.......+.........................................320 ...................OXOXOX.............|2XOX......+........................................310 ...................OXO.O..............|OXO45......+.......................................300 ___________________OX__________________O_OXO_______+______________________________________290 ...................OX.................|..OXOX.X.X...+.....................................285 ...................OX.................|..OXOXOXOX6...+....................................280 ...................OX.................|..OXOXOXOXO....+...................................275 ...................OX.................|..OXO.O.O.O.....+..................................270 ___________________OX____________________OX______O______+_________________________________265 ...................OX.................|..O3......O.......+................................260 ...................OX.................|..O.......OX...X...+...............................255 ...................OX.................|..........OXOX.7O...+..............................250 ...................OX.................|..........OXOXOXO....+.............................245 ___________________O_____________________________O_OXOXOX_X__+____________________________240 ......................................|............OXOXOXOXO..+...........................235 ......................................|............O.OXOXOXO...+..........................230 ......................................|..............OXOXO.O....+.........................225 ......................................|..............OXOX..O.....+........................220 _____________________________________________________O_O___O______+_______________________215 ......................................|....................OX......+......................210 ......................................|....................OXO......+.....................205 ......................................|....................OXO.......+....................200 ......................................|....................OXO........+...................195 ___________________________________________________________OXO_________+__________________190 ......................................|....................O.O..........+.................185 ......................................|......................O...........+................180 ......................................|......................OX...........+...............175 ......................................|......................OX8...........+..............170 _____________________________________________________________OXO____________+_____________165 ......................................|......................OXO.............+............160 ......................................|......................OXO..............+...........155 ......................................|......................OXO...............+..........150 ......................................|......................OXO................+.........145 _____________________________________________________________O_OX________________+________140 ......................................|........................OXO................+.......138 ......................................|........................OXO.................+......136 ......................................|........................OXO..................+.....134 ......................................|........................OXO....X.....X...X....+....132 _______________________________________________________________OXO____XO____XO__XO____+___130 ......................................|........................OXO....XOX...XOX.XO.....+..128 ......................................|........................O.O....XOXO..XOXOXO......+.126 ......................................|..........................O....XOXO..XOXOXO.......+124 ......................................|..........................O....XOXOX.XOXOXO........122 _________________________________________________________________O____XOXOX9XOXOXO________120 ......................................|..........................O....XO.OXOXO.OXO........118 ......................................|..........................O....X..OXOX..OXO........116 ......................................|..........................OX...X..O.OX..OXO........114 ......................................|..........................OXO..X....OX..OXO........112 _________________________________________________________________OXO__X____OX__OXO________110 ......................................|..........................OXOX.X....OX..OXO........108 ......................................|..........................OXOXOX....O...OXOX.......106 ......................................|..........................OXOXOX........OXOXO......104 ......................................|..........................OXOXO.........OXOXOX.....102OXOXOXOXOXO999988
56055054053052051050049048047046045044043042041040039038037036035034033032031030029028528027527026526025525024524023523022522021521020520019519018518017517016516015515014514013813613413213012812612412212011811611411211010810610410298969492908886
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The Complete Guide to Point-and-Figure Charting
As long as the price trades below the bearish resistance line, the position is said to be long-termbearish. There may be minor rallies, but until the bearish resistance line is penetrated, the majortrend is considered to be a declining one and buy signals have a high probability of being false.Chart 2.22 – ‘Polar’ bearish resistance lines in Sweden [.SXAXPI]SXAXPI / 3 box rev, / 1997.01.02 to 2003.01.16430 ...|...|....|..............|..................420 ...|...+....|..............|..................410 ...|...X+...|..............|..................400 _______XO+____________________________________390 ...|...3O.+.|..............|..................380 ...|...XOX.X|..............|..................370 ...|...X4XOXO..............|..................360 ...|...XO5O7O+.............|..................350 _______2O_O_O_+_______________________________340 ...|...X....8..+...........|..................330 ...|...1....9...+..........|..................320 ...|...X....A....+.........|..................310 ...|...X....O.....+........|..................300 _______X____BX_____+__________________________290 ...|...X....CX2.....+......|..................285 ...|...C....OXO......+.....|..................280 ...|...X....1XOX......+....|..................275 ...|...X....O.OXO......+...|..................270 _______X______O3O__X____+_____________________265 ...|...X....|.O.O..56....+.|..................260 ...|...X....|...O..XO.....+|..................255 ...|...B....|...O..XO......+..................250 ...|...X....|...OX.XOX...X.|+.................245 _______X________OXOXOXO__COX_+________________240 ...|...A....|...OXOXO7OX.XOXOX+...............235 ...|...7....|...OXOXO.OX8XO1OX4+..............230 ...7...X....|...O.4X..OXOXO|OXO.+.............225 ...68..6....|.....O...O.OX.|O3O..+............220 ___XO__X________________9B__O_O___+___________215 ...4O..X....|...........OX.|..O....+..........210 ...XO..4....|...........OX.|..O.....+.........205 ...XO..X....|...........OX.|..O......+........200 ...3OX.X....|...........OA.|..5.......+.......195 ___XOXCX________________OX____6________+______190 .8.XOXO1....|...........OX.|..O.........+.....185 .XA29XO|....|...........OX.|..OX.........+....180 .XOXOB.|....|...........OX.|..OXO.........+...175 .7OXOX.|....|...........O..|..O7O..........+..170 _6OCOX________________________O_O______X____+_165 .5O|AX.|....|..............|....O8.X...XC....+160 .3.|OX.|....|..............|....OXOX9..XO.....155 .X.|OX.|....|..............|....OXOXO..BO.....150 .2.|OX.|....|..............|....OXO.O..XO.....145 _X__O___________________________O___O__X______140 .X.|...|....|..............|........OX.X......138 .X.|...|....|..............|........OXOX......136 1..|...|....|..............|........OXOX......134 ...|...|....|..............|........OXOX......132 ____________________________________O_AX______130 ...|...|....|..............|..........OX......128 ---9---0----0--------------0----------OX-----126 ---8---0----1--------------2----------O-------
102
430420410400390380370360350340330320310300290285280275270265260255250245240235230225220215210205200195190185180175170165160155150145140138136134132130128126
Interpreting the Charts
Trading strategies
When trading a long-term bearish position, there are three possible trading strategies. Thedecision as to which one of them to use is a personal one, which will depend on the importanceto you of speedy capital turnover, and of close trend fits.1.
The most aggressive approach is to ignore the bearish resistance line and take everysignal as it occurs. This strategy yields the greatest number of trades, the greatestcommission cost and generally has the highest number of false signals, but it does permitthe trader to profit from minor price moves within the major downtrend. It will alsopermit a better execution at market bottoms, but these major advantages must be weighedagainst the losses on false signals in trying for the bottom and the higher commissioncosts of increased trading activity.
2.
The second strategy is to take only the short sale and cover signals while avoidinglong positions since the trend is bearish and buy signals tend to be false.
3.
The third technique requires that short signals be taken, but once taken they are notcovered on the traditional buy signal until a buy signal occurs above the bearishresistance line. In this way the positions are held longer, the commissions costs arelowered, and potential whipsaws are reduced, but the ability to squeeze out profits onminor moves within the major trend and the opportunity of closing out the position at thebest possible price is eliminated.
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The Complete Guide to Point-and-Figure Charting
Redrawing bullish support and bearish resistance linesWhen using either the bearish resistance line or a bullish support line, the price should give amajor breakthrough, meaning that it passes completely through the line as opposed to simplystraddling the line.Chart 2.23 – Lowering of supports shown by Wolseley [WOS.L]WOS.L / 2000.01.04 to 2002.08.22780 .......................|..........................|...................770 .......................|..........................|....X..............760 .......................|..........................|....XO.............750 .......................|..........................|..X.XO.............740 .......................|..........................|..XOXOX............730 .......................|..........................|..4OXOXO...........720 .......................|..........................|..XOXOXO...........710 .......................|..........................|..XO5OXO...........700 .......................|..........................|..XO.6.O...........690 .......................|..........................|..X....OX.7........680 .......................|..........................|..X....OXOXO.......670 .......................|..........................|..X....OXOXO.......660 .......................|..........................|..X....OXOXO.......650 .......................|..........................|..X....O.OXO.......640 .......................|..........................|..X......OXO......X630 .......................|..........................|..X......O.O......X620 .......................|..........................|..X........O......X610 .......................|..........................|..3........O......X600 .......................|..........................|..X........O......X590 .......................|..........................|X.X........OX...X.X580 .......................|.........................X|XOX........OXO..8OX570 .......................|.........................X1XOX........OXO..XOX560 .......................|...X.....................XOXOX.......+OXOX.XOX550 .......................|...XO..X...............X.XOXOX......+.OXOXOXOX540 .......................|...XOX.7O..............XOXO2O......+..OXOXOXOX530 .......................|...XOXOXOX.X...........XOXO.......+...OXOXOXOX520 .......................|...XOXOXOXOXO..........COX|......+....O.OXO.OX510 .......................|...XOXOXOXOXO..........XO.|.....+.......O...OX500 .......................|...XO6OXOXO8O..........X..|....+............OX490 .......................|.X.XO.OXO.O.O........X.X..|...+.............O.480 .X.....................|.X3X..OX....9....X.X.XOX..|..+................470 .XO....................1.XOX..O.....O..X.XOXOXOX..|.+.................460 .XO....................XOXO5........O..AOXOXOXOX..|+..................450 1XO....................XOXOX........O..XOXOXOXO...+...................440 OXO....................XO2OX........O..XOXOXO....+|...................430 OXO....................XO.O4........O..XO.BX....+.|...................420 O.O....................X..OX........O..X..O....+..|...................410 ..O..................X.X..OX........O..X......+...|...................400 ..O..................XOX..OX.......+OX.X.....+....|...................390 ..O......X.........X.BOX..OX......+.OXOX....+.....|...................380 ..O......XOX.......X9XOX..O......+..OXOX...+......|...................370 ..O....X.XOXOX.X.X.XOXOC........+...OXOX..+.......|...................360 ..OX...XOXOXOXOX7X8XOXO|.......+....O.OX.+........|...................350 ..OX2..XOXOXOXOXOXOXOX.|......+.......OX+.........|...................340 ..OXO..XOXOXO5O6OXOXOX.|.....+........O+..........|...................330 ..OXO..XOXOXO.O.OXO.OA.|....+.........+...........|...................320 ..OXOX.XOXOX....OX..OX.|...+......................|...................310 ..O.OXOXO.O4....OX..OX.|..+.......................|...................300 ....OXOX..O.....OX..OX.|.+........................|...................290 ....O3OX........OX..OX.|+.........................|...................280 ....O.OX........OX..OX.+..........................|...................270 ......OX........OX..OX+|..........................|...................260 ---------------------+-0--------------------------0------------------250 -----------------------1--------------------------2-------------------
780770760750740730720710700690680670660650640630620610600590580570560550540530520510500490480470460450440430420410400390380370360350340330320310300290280270260250
As seen in Wolseley [WOS.L], the bullish support line is no longer valid. But if the respectivebasic bearish or bullish nature of the market has not changed, a new and better fitting line wouldbe drawn. So in Wolseley the bullish support is lowered.
104
Interpreting the Charts
Chart 2.24 – Lowering resistances on BTG [BGC.L]
BGC.L / 2000.01.04 to 2003.01.161970 .........|.....|.......................|....... 19701895 ......+..|.....|.......................|....... 18951822 X.....X+.|.....|.......................|....... 18221752 XO....AB+|.....|.......................|....... 17521684 XO____XO_+_____________________________________ 16841619 XO....XO.|+....|.......................|....... 16191557 XO....XOX|.+...|.......................|....... 15571497 XO....9OX1..+..|.......................|....... 14971440 XO....XOXO...+.|.......................|....... 