...________________________________________OXO_O__+_XO_______________________________________........................................OX..O.+..X........|.......................................................................OX..O+...X........|.......................................................................O...OX...X........|...........................................................................OXO..X........|...............................____________________________________________OXO__X________________________________________............................................OXOX.X........|...........................................................................OXOXOX........|...........................................................................OXOXOX........|...........................................................................O.O.OX........|...............................________________________________________________OX________________________________________................................................OX........|...............................------------------------------------------------OX--------0------------------------------------------------------------------------------O---------2-------------------------------
9088868482807876747270686664626059585756555453525150494847464544434241403938373635343332313029292828272726262525242423
After the fall of Xenova, the stock starts to break one bullish resistance line after another to freeits way for a recovery.
94
Interpreting the Charts
Bearish support linesBearish support lines are drawn on bearish charts from the upper right hand corner of thehighest exposed X in a wall of two or more exposed Xs (highlighted) at a 45 degree angle downfrom upper left to lower right. The Swiss SMI – charted with a relative big box size for an index– shows an excellent example of a bearish support line, which held for more than 3 years.Chart 2.16 – Swiss Market Index [.SSMI], with bearish support lineSSMI / 3 box rev, log1/ 1997.01.03 to 2003.01.168600 ........|.........|..|...|.....|..............|..... 86008400 __________X___________X_+___________________________ 84008200 ........|.X8......|..|89X+.....|..............|..... 82008000 ........|.7O......|..|7OX2+....|..............|..... 80007800 ........4.XO......|..|5OCO.+...|..............|..... 78007600 ........XOXO......X..|4A.OX.+..|..............|..... 76007400 ________XO6O____X_1OB_X__356_+______________________ 74007200 ........3O.O....XCXOX3X..OXO..+|..............|..... 72007000 ........X..OX...XOXOXOX..OXO...+..............|..... 70006800 ........X..OXO..XOX59O...O47...|+.............|..... 68006600 ........2..O9O..BO|8.|...O.8..X|.+............|..... 66006400 ________1__O_O__X+_________9__B6__+_________________ 64006200 ........X....O..X.+..|...|.O..AO...+..........|..... 62006000 X.......X....O..X.|+.|...|.O..XO7...+.........|..... 60005900 XOX...X.X....O..X.|.+|...|.O..XOXO...+........|..... 59005800 7OX8..AOC....O..X.|..+...|.OX.XOXO....+.......|..... 58005700 XOXOX_XOX____AX_X_____+____OXOXOXO_____+____________ 57005600 XO.OXOXOB....OXOX.|..|.+.|.OXOXOXO......+.....|..... 56005500 X..OXOXOX....OXOX.|..|..+|.O.OXO.O..X....+....|..... 55005400 X..OXOXOX....OXOX.|..|...+...OX|.O..XO....+...|..... 54005300 6..O.O9OX....OXO..|..|...|+..OX|.OX.XO.....+..|..... 53005200 X____O_OX____O_____________+_OX__OX8XOX_____X_______ 52005100 X......OX.........|..|...|..+OX|.OXOXOXO..B.XC|..... 51005000 5......O..........|..|...|...O.|.OXOX9XO..XOXOX..... 50004900 X.......|.........|..|...|....+|.OXOXO.OX.XOXOX..... 49004800 4.......|.........|..|...|.....+.OXOX..OXAXO.OX..... 48004700 X_______________________________+OXO___OXOX__O1_____ 47004600 3.......|.........|..|...|.....|.OX....OXOX..O|..... 46004500 X.......|.........|..|...|.....|.OX....OXOX...|..... 45004400 X.......|.........|..|...|.....|.O.+...O.O....|..... 44004300 2.......|.........|..|...|.....|....+.........|..... 43004200 X____________________________________+______________ 42004100 X.......|.........|..|...|.....|......+.......|..... 41004000 X.......|.........|..|...|.....|.......+......|..... 40003900 1.......|.........|..|...|.....|........+.....|..... 39003800 --------9---------9--0---0-----0--------------0----- 38003700 --------8---------9--0---1-----2--------------3----- 3700
As usual, for explanatory reasons we have extended the support line towards the right. On atypical p&f chart the line would be drawn to the first penetration, in this case around September2001.
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The Complete Guide to Point-and-Figure Charting
Chart 2.17 – Vodafone [VOD.L] follows a bearish support line
VOD.L / 3 box rev, log1/ 2000.11.13 to 2002.04.042902852802752702652602552502452402352302252202152102052001951901851801751701651601551501451401381361341321301281261241221201181161141121101081061041021009896944746
...........|.............................................................|...........................|.............................................................|.....................X.X...|.............................................................|................_____XOXO_________________________________________________________________________________.X...XOXO..|.............................................................|.................XO..XOXO..|.............................................................|.................XOX.XOXOX.|.............................................................|.................XOXOXO.OXO|.X...........................................................|................OXOXOX+_OXO1_XO___________________________________________________________________________OXOXOC.+O.OXOXO....X.....................................................|................OXOXO...+.OXOXOX.X.X2....................................................|................O.O......+OXOXOXOXOXO....................................................|..........................O|OXOXOXOXO..............X.....................................|................___________+OXOXOXO_O______________XO_____________________________________________________...........|O.OXO...O............X.XO....................................|...........................|.+OX....O..........X.XOXO....................................|...........................|..O.....O....X.X.X.XOXOXO....................................|...........................|...+....O....XOXOXOXOXO.OX.X.................................|................________________+___OX_X_XOXOXOXOX__5XOXO_________________________________________________...........|.....+..OXOX3XOXOXOXOX..OXOXOX.........................X.X...|...........................|......+.OXOXOXOXOXO.O4..O.O.OXO........................XOXOX.X...........................|.......+OXOXOXO.O...O.......OXO........................XOCOXOXO..........................|........O.O.O...............OXO........................XO.OXOXO..............._____________________+__________________OXO________________________X__OXO1O_______________...........|..........+.................6.O7...................X.X.X..O.O|O..........................|...........+..................OXOX.................XOXOX.....|O..........................|............+.................OXOXO8...............XOXOB.....|O..........................|.............+................OXOXOXO..............AOXO......|O...............__________________________+_______________OXO_OXO__X___________XO_________O_______________...........|...............+..............OX..OXOX.XO......X.X.X.........|OX.......X.................|................+.............O...OXOXOXO....X.XOXOX.........|2XOX...X.XOX...............|.................+................OXOXOXO....XOXOXOX.........|OXOXO..XOXOXO..............|..................+...............OXO.O.OX.X.XOXOXOX.........|O.OXO..XOXOXO..._______________________________+______________O_____OXOXOXO9OXOX____________OXO__XOXOXO___...........|....................+...................OXOXOXO.OXO..........|..O.OX.X3.O.OX.X...........|.....................+..................OXOXO...OX...........|....OXOX....OX4X...........|......................+.................OXO.....OX...........|....OXOX....OXOX...........|.......................+................OX......OX...........|....OXO.....O.O.____________________________________+_______________OX______O_________________O___________...........|.........................+..............OX...................|...........................|..........................+.............OX...................|...........................|...........................+............OX...................|...........................|............................+...........OX...................|................_________________________________________+__________OX____________________________________...........|..............................+.........OX...................|...........................|...............................+........O....................|...........................|................................+............................|...........................|.................................+...........................|................______________________________________________+___________________________________________...........|...................................+.........................|...........................|....................................+........................|...........................|.....................................+.......................|...........................|.............................................................|................__________________________________________________________________________________________-----------0-------------------------------------------------------------0--------------------------1-------------------------------------------------------------2----------------
Vodafone follows nicely the bearish support during most of 2001.
96
2902852802752702652602552502452402352302252202152102052001951901851801751701651601551501451401381361341321301281261241221201181161141121101081061041021009896944746
Interpreting the Charts
Chart 2.18 – ARM [ARM.L]ARM.L / 3 box rev,/ 2001.10.09 to 2002.10.25450 ..................|.......................................................................440 ........X.........|.......................................................................430 ........XO........|.......................................................................420 ........XO....X...|.......................................................................410 ________XOX_X_XO__________________________________________________________________________400 ......X.XOXOXOCO..X.......................................................................390 ......XOXOXOXOXO..XO......................................................................380 ......XOXOXO.OXO..XO......................................................................370 ......XO.O...OXOX.1O......................................................................360 ____X_B+_____OXOXOXO______________________________________________________________________350 ....XOX.+....O.OXOXO......................................................................340 ....XOX..+.....OXOXOX.....................................................................330 ..X.XOX...+....OXO|OXO....X...............................................................320 X.XOXOX....+...O..|OXO....XO..............................................................310 XOXOXO______+______OXOX___XO______________________________________________________________300 XOXO.........+....|OX2XOX.XOX.X...........................................................290 XO............+...|O.OXOX3XOXOXOX.........................................................285 X..............+..|..OXOXOXOXOXOXO........................................................280 X...............+.|..O.OXO.O.O.OXO........................................................275 X________________+_____OX______OXOX_______________________________________________________270 X.................+....OX......4XOXO......................................................265 X.................|+...OX......OXOXO......................................................260 X.................|.+..OX......OXOXO......................................................255 ..................|..+.O.......OXOXOX.....................................................250 ______________________+________O_OXOXO____________________________________________________245 ..................|....+.........OXOXO..X.................................................240 ..................|.....+........OXO.O..XO................................................235 ..................|......+.......OX..O..XOX...............................................230 ..................|.......+......OX..OX.XOXO..............................................225 ___________________________+_____OX__OXOXOXO______________________________________________220 ..................|.........+....O...OXOXOXO..............................................215 ..................|..........+.......O5O.O.O..............................................210 ..................|...........+......O.....O..............................................205 ..................|............+...........O..............................................200 ________________________________+__________O______________________________________________195 ..................|..............+.........O..............................................190 ..................|...............+........O..............................................185 ..................|................+.......OX.......................X.X...................180 ..................|.................+......OX6X.....................XOXO..................175 _____________________________________+_____OXOXO____________________XOXO__________________170 ..................|...................+....OXOXO........X...........XO.O..................165 ..................|....................+...O.OXO........XO..........X..O..................160 ..................|.....................+....OXO........XO........X.X..O..................155 ..................|......................+...O.O........XO......8.XOX..O..................150 __________________________________________+____O__X_____XOX_X___XOXOX__9__X_______________145 ..................|........................+...OX.X7X...XOXOXOX.XOXO...OX.XO..............140 ..................|.........................+..OXOXOXO..XOXOXOXOXOX....OXOXO..............138 ..................|..........................+.OXOXOXO..XOXOXOXOXOX....OXOXO..X...........136 ..................|...........................+OXOXOXO..XOXOXOXO.OX....OXO.O..XO..........134 _______________________________________________OXOXOXOX_XOXOXOX__OX____OX__O__XO__________132 ..................|............................OXOXOXOXOXOXOXOX..OX....OX..OX.XO..........130 ..................|............................O.OXOXOXOXOXOXOX..OX....OX..OXOXOX.........128 ..................|..............................OXO.OXOXOXOXO...OX....O...OXOXOXO........126 ..................|..............................OX..OXOXO.O.....O.........OXOXOXO........124 _________________________________________________OX__OXO___________________OXOXOXO________122 ..................|..............................OX..OX+...................OXOXOAO........120 ..................|..............................O...OX.+..................O.OXO.O........118 ..................|..................................O...+...................OX..O........116 ..................|.......................................+..................OX..O........114 ___________________________________________________________+_________________OX__O________112 ..................|.........................................+................OX..O........110 ..................|..........................................+...............O...O........108 ..................|...........................................+..................O........106 ..................|............................................+.................O........38 ------------------0----------------------------------------------------------------------37 ------------------2-----------------------------------------------------------------------
4504404304204104003903803703603503403303203103002902852802752702652602552502452402352302252202152102052001951901851801751701651601551501451401381361341321301281261241221201181161141121101081063837
Like bullish charts that are chasing bullish resistance lines, bearish stocks follow bearish supportlines. Again, we draw attention to the fact that the trend line in the ARM chart was drawn withthe information available in October 2001 yet was giving a clear indication of the price movesfor more than a year.
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The Complete Guide to Point-and-Figure Charting
Chart 2.19 – Amvescap’s [AVZ.L] impressive bearish support
AVZ.L / 2 box rev/ 2002.01.02 to 2002.10.311120 .X........................................................................................ 11201100 _XO_______________________________________________________________________________________ 11001080 .XOX...................................................................................... 10801060 .XOXOX.................................................................................... 10601040 .XO.OXO................................................................................... 10401020 .X+.O.O..............X.................................................................... 10201000 1X_+__OX_____________XOX__________________________________________________________________ 1000980 ....+.OXOX.X.........XOXOX................................................................ 980960 .....+O.OXO2O........XO.O4O............................................................... 960940 ......+.O.OXO........X..O.O............................................................... 940920 .......+..OXO........X....O............................................................... 920900 ________+_O_OX_X_____X____OX______________________________________________________________ 900880 .........+..OXOXO..X.X....OXO............................................................. 880860 ..........+.OXO.OX.XO3....OXO............................................................. 860840 ...........+OX..OXOXO.....O.O............................................................. 840820 ............O...OXOX........O............................................................. 820800 _____________+__O_O_________OX____________________________________________________________ 800780 ..............+.............OXO..X........................................................ 780760 ...............+............O.OX.XO....................................................... 760740 ................+.............O5OXOX...................................................... 740720 .................+............O.O.OXO..................................................... 720700 __________________+_______________O_OX____________________________________________________ 700680 ...................+................OX6................................................... 680660 ....................+...............OXO................................................... 660640 .....................+..............O.O................................................... 640620 ......................+...............O................................................... 620600 _______________________+______________O___________________________________________________ 600590 ........................+.............OX.................................................. 590580 .........................+............OXO................................................. 580570 ..........................+...........OXO................................................. 570560 ...........................+..........OXOX................................................ 560550 ____________________________+_________OXOXOX_7____________________________________________ 550540 .............................+........O.OXOXOXO........................................... 540530 ..............................+.........OXOXOXO........................................... 530520 ...............................+........OXOXOXOX.........X................................ 520510 ................................+.......OXO.OXOXOX...X...XO............................... 510500 _________________________________+______OX__OXOXOXO__XO__XO_______________________________ 500490 ..................................+.....O...OXOXO.O..XO..XO......X........................ 490480 ...................................+........O.OX..O..XOX.XO....X.XO....................... 480470 ....................................+.........O...OX.XOXOXO....XOXO....................... 470460 .....................................+............OXOXOXOX8..X.XO.O....................... 460450 ______________________________________+___________OXOXOXOXO__XOX__O_______________________ 450440 .......................................+..........OXOXOXO.O..XOX..O....................... 440430 ........................................+.........O.OXOX..O..XOX..O....................... 430420 .........................................+..........OXOX..O..XO...O....................... 420410 ..........................................+.........OXOX..OX.X....9X.X.X.................X 410400 ___________________________________________+________O_O___OXOX____OXOXOXO______________X_X 400390 ............................................+.............OXO.....OXOXO.OX.............XOX 390380 .............................................+............OX+.....O.OX..OXO............XO. 380370 ..............................................+...........OX.+......O...OXO..........X.X.. 370360 ...............................................+..........O...+.........O.O........X.XOX.. 360350 ________________________________________________+______________+__________O________XOXOX__ 350340 .................................................+..............+.........OX.X.....XO.OX.. 340330 ..................................................+..............+........OXOXO....X+.O... 330320 ...................................................+..............+.......O.OXOX...X.+.... 320310 ....................................................+..............+........OXOXO..X..+... 310300 _____________________________________________________+______________+_______OXOXO__X___+__ 300290 ......................................................+..............+......O.AXO..X....+. 290285 .......................................................+..............+.......O.OX.X.....+ 285280 ........................................................+..............+........OXOX...... 280275 .........................................................+..............+.......OXOX...... 275270 __________________________________________________________+______________+______O_OX______ 270265 ...........................................................+..............+.......OX...... 265260 ............................................................+..............+......OX...... 260255 .............................................................+..............+.....OX...... 255250 ..............................................................+..............+....OX...... 250245 _______________________________________________________________+______________+___OX______ 245240 ................................................................+..............+..O....... 240235 -----------------------------------------------------------------+--------------+--------- 235230 ------------------------------------------------------------------+----------------------- 230
Amvescap follows its bearish support line precisely for 8 months and after that generates a newbearish support on a higher level which is followed for 2 months.98
Interpreting the Charts
The bearish support line defines the lower side of a bearish channel and provides an indicationof how low the position might decline before support is reached.As a trading technique, the bearish support line can be used:1.
as an entry point for a long position in the hope of an immediate rally permitting a quickprofit, or
2.
as a place to cover a short.
In both cases the purchase takes place on weakness where buying competition is absent, makingit easy to obtain a good fill price.But note that this and the other trend lines discussed need not be exactly touched in order to bevalid. They provide an indication of a move, not the exact level of a move and should be usedonly as approximate, never absolute, points. Also, bearish support lines, like bullish resistancelines, are often broken and, therefore, all possible lines should be drawn and the market climateevaluated for a best guess of which line will ultimately hold.Which support line?
Experience again has shown that:1.
the first, or highest, line will hold for a bearish position declining in a bullish market,
2.
the second line will normally be the one which holds a declining position in a neutralmarket, and
3.
the third, or possibly the fourth, will stop the column slide in a bearish environment.
Such parallel supports can be seen in the DAX chart overleaf.
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The Complete Guide to Point-and-Figure Charting
Chart 2.20 – German DAX [.GDAXI] with parallel supportsGDAXI / 3 box rev, / 1999.01.04 to 2002.06.268200 ..............|.................................|...............|..... 82008000 ..............|.......X.X.......................|...............|..... 80007920 ..............|.......XOXO......................|...............|..... 79207840 ..............|.......3OXO......................|...............|..... 78407760 ..............|.....X.XOXO......................|...............|..... 77607680 ..............|.....XOXOXO......................|...............|..... 76807600 ..............|.....XOXOXOX.....................|...............|..... 76007520 ..............|.....XOXOX4XO5...................|...............|..... 75207440 ..............|.....XOXO.OXOXO..X.X.9...........|...............|..... 74407360 ..............|.....XO...OXOXOX.XOXOXO..........|...............|