X__O_+________________X____________________________________OX__OX7_______.....5....O..X.|.2..O+...............|.3....|.........................|.....O...OXO............X....O..XCX.X..OX...............|.X....|.........................|.........O.OX.......2...X....O..XOXOX..O9O..............|.X....|.........................|...........OXO......XOX.X....OX.XO1OX..OXO..........X...1.X....|.........................|...........OXO....._XOXOX____OXBXO_OX__OXO______X___XCX_XOX__________________________________________O_O_____.XOXOX....OXOX.|OX..OXO......XO..XOXOXOX....|.........................|.............O......XO3OX....OXOX.|OX..OXO......XOB.XOXOXOX....|.........................|.............O......XO.OX....OXO..|OX..O.O......XOXOXOXOXOX....|.........................|.............O......X..4.....OX...|O.....O......XOXOXOXOXOX....|.........................|.............O....._X________OX__________O______XOXOXOXOXOX____________________________________________O_____.X........OX...|......O......XOXO.OXOXOX....|.........................|.............O......X........O....|......O....X.XOX..O.O|OX....|.........................|.............O......X.............|......O....XOXOX.....|O2....|.........................|.............OX.X..1..............|......OX...XOXOX.....|OX....|.........................|.............O8OXO.______________________OXOX_XOXOX______OX____________________________________________OXOXOX...............|......OXOXOXOXO......|OX....|.........................|.............OXOXOX...............|......OXOXOXOX.......|O.....|.........................|.............OXO.OX...............|......OXO.OXO........|......|.........................|.............OX..OX...............|......OX..AX.........|......|.........................|.............OX..O.______________________OX__OX________________________________________________________O_____...............|......O...OX.........|......|.........................|..................................|..........OX.........|......|.........................|..................................|..........OX.........|......|.........................|..................................|..........OX.........|......|.........................|...................__________________________OX______________________________________________________________...............|..........O..........|......|.........................|..................................|.....................|......|.........................|...................---------------9---------------------9------0-------------------------0---------------------------------8---------------------9------0-------------------------1-------------------
290285280275270265260255250245240235230225220215210205200195190185180175170165160155150145140138136134132130128126124122120118116114112110108106104102100989694
The bullish resistance line is used as a gauge of the height a column of Xs might reach on thecurrent move. The more times it holds, the stronger it becomes.
90
Interpreting the Charts
Trading strategies
As a trading tool, the bullish resistance line can be used as:1.
As a point to enter a short in the expectation that upon reaching the line, the price willbounce off and down, or
2.
As a place to liquidate a long position in a period of strength as opposed to closing it outon a regular sell signal in a period of weakness. Moreover, this is especially importantwhen trading highly volatile commodities which may lock limit down with weakness,necessitating a liquidation on strength, not weakness.
Quite often a very bullish position will not stop at the first of the bullish resistance lines, buttrade right through it as if it did not exist. This is a strong bullish indication and will generallymean that the price will rise to the next higher resistance line. For this reason all resistance linesshould be drawn on the chart as done in Chart 2.13 overleaf.Which resistance line?
Experience has led the authors to the conclusion that a strong stock or commodity will:1.
in a neutral to bearish market climate, generally run out of steam at the first or lowestbullish line;
2.
in a medium bullish environment, reach the second as shown; and
3.
in exceedingly strong markets, reach the third or fourth resistance line which is the onethat finally holds.
So judge the market climate before deciding on which line to blow the long out or take a short.
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The Complete Guide to Point-and-Figure Charting
Chart 2.13 – Pace Micro [PIC.L] sets the stage for the rally of the century in 1998PIC.L / 3 box rev, c e/ 1997.11.12 to 1998.12.15114 .......................|.................................................................. 114112 .......................|.............................+.................................... 112110 .......................|.........................X..+..................................... 110108 _________________________________________________XO+______________________________________ 108106 .......................|.........................XO....................................... 106104 .......................|.........................XO...............+....................... 104102 .......................|........................+XO..............+........................ 102100 .......................|.......................+.XO.............+......................... 10098 ______________________________________________+__XO____________+__________________________9896 .......................|.....................+...XO...........+...........................9694 .......................|....................+....XO..........+..............+.............9492 .......................|...................+.....XO.........+..............+..............9290 .......................|..................+......XOX.......+..............+...............9088 _________________________________________+_______XOXOX____+______________+________________8886 .......................|................+........XOXOXO..X...........X..+.................8684 .......................|...............+.........XOXOXOX+XO..........X8+...........X...X..8482 .......................|..............+..........XOXOXOXOXO..........XO............XOX.XOX8280 .......................|.............+...........XOXO5OXOXO..........XO............XOXCXOX8078 ____________________________________+____________XOXOXO_OXO_________+XO____________XOXOXOX7876 .......................|...........+.............XOXOX..6XOX.X.....+.XOX...........XO.OXOX7674 .......................|..........+..............XOXOX..O.OXOX7...+..XOXO..........X..OXOX7472 .......................|.........+...............XOXOX....OXOXO..+...XOXOX.......X.X..OXO.7270 .......................|........+................XOXO.....O.O.O.+....XOXOXOX.X.A.XOX..OX..7068 _______________________________+________________+XOX__________O+_____XOXOXOXOXOXOXOX__OX__6866 .......................|......+................+.XOX..........O......XO.OXOXOXOXOXOX..O...6664 .......................|.....+................+..XO..........+O......X..O.O.OXOXOXOB......6462 .......................|....+................+...X..........+.OX.....X......OXO.OXO.......6260 .......................|...+................+....X.........+..OXOX...X......9X..OX........6059 __________________________+________________+_____X________+___OXOXO__X______OX__OX________5958 .......................|.+................+......X.......+....OXOXOX.X......OX..OX........5857 .......................|+................+.......X......+.....O.OXOXOX......O...OX........5756 O......................+................+........X.....+........OXOXOX..........OX........5655 OX.X..................+|...............+.........X....+.........OXOXOX..........OX........5554 OXOXOX_X_____________+________________+__________X___+__________OXO_O___________O_________5453 OXOXOXOXOX..........+..|.............+...........X..+...........OX........................5352 O.O.OXOXOXOX.......+...|............+............X.+............OX........................5251 ....OXOXOXOXO.....+....|...........+.............X+.............OX........................5150 ....O.O.O.OCOX...+.....|.X........+..............X..............O.........................5049 __________O_OXO_+________XO______+______________+X________________________________________4948 ............OXO+.......1.XO.....+..............+.X........................................4847 ............O.OX.X.X.X.XOXO....+..............+X.X........................................4746 ..............OXOXOXOXOXOXO...+..........X...+.XOX........................................4645 ..............OXOXOXOXOXO.O..+...........XO.+..XOX........................................4544 ______________O_O_O_O_OX__O_+____________XO+___XOX________________________________________4443 ......................O|..O+.....X...X...XOX.X.XO4........................................4342 .......................|..OX.....XO..XO..XOXOXOXO.........................................4241 .......................|..OXO....XOX.XO..XOXOXOX..........................................4140 .......................|..OXO....XOXOXOX.XOXO.O...........................................4039 __________________________OXO____XOXOXOXOXO_______________________________________________3938 .......................|..OXO....XO.OXOXOX................................................3837 .......................|..OXO....X..OXO3OX................................................3736 .......................|..OXOX...X..OXO.O.................................................3635 .......................|..O.OXO..X..OX....................................................3534 ____________________________OXO__X__O_____________________________________________________3433 .......................|....OXOX.X........................................................3332 .......................|....OXOXOX........................................................3231 .......................|....OXOXOX........................................................3130 .......................|....OXO.O2........................................................3029 ____________________________OX__O_________________________________________________________2929 .......................|....OX............................................................2928 .......................|....OX............................................................2828 .......................|....OX............................................................2827 .......................|....OX............................................................2727 ____________________________OX____________________________________________________________2726 .......................|....OX............................................................2626 .......................|....OX............................................................2625 .......................|....OX............................................................2525 .......................|....OX............................................................2524 ____________________________O_____________________________________________________________2424 .......................|..................................................................2412.80 -----------------------9------------------------------------------------------------------12.8012.60 -----------------------8------------------------------------------------------------------12.60
In this chart we have extended a number of trend lines and have omitted some. We thought thechosen and extended trend lines show clearly the relevance of the bullish resistance. In standardcharts you stop drawing a trend line as soon as it penetrates. However, the extended trend linesshow their relevance even beyond a penetration of a column.92
Interpreting the Charts
Chart 2.14 – Pace [PIC.L] goes for it!
13001280126012401220120011801160114011201100108010601040102010009809609409209008808608408208007807607407207006806606406206005905805705605505405305205105004904804704604504404304204104003903803703603503403303203103002902852802752702652602552502452402352302252202152102052001951901851801751701651601551501451401381361341321301281261241221201181161141121101081061041021009896949290888684828078767412.8012.60
.|....................................................................|................... 1300.|....................................................................|..................X 1280_________________________________________________________________________________________X 1260.|....................................................................|..................X 1240.|....................................................................|..................X 1220.|....................................................................|..................X 1200.|....................................................................|..................X 1180_________________________________________________________________________________________X 1160.|....................................................................|..................X 1140.|....................................................................|..................X 1120.|....................................................................|..................X 1100.|....................................................................|.................+X 1080_______________________________________________________________________________________+_X 1060.|....................................................................|...............+..X 1040.|....................................................................|..............+...X 1020.|....................................................................|.............+....X 1000.|....................................................................|......X.....+.....X 980_____________________________________________________________________________XO___+______X 960.|....................................................................|......XO..+.....X.X 940.|....................................................................|......XO.+......XOX 920.|....................................................................|......XO+...X.X.XOX 900.|....................................................................|....X.XOX...XOXOXO. 880___________________________________________________________________________XOXOXOX_XOXOX__ 860.|....................................................................|....XOXOXOXOXOXOX.. 840.|....................................................................|....XOXOXOXOXOXOX.. 820.|....................................................................|....XOXO.O2O.O.O... 800.|....................................................................|....XOX..O......... 780_________________________________________________________________________X_XO_____________ 760.|....................................................................|..XOX.............. 740.|....................................................................|..XOX.............. 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460.|...............................................X.XOXO.OX......O.....O................... 450.|...............................................XOXOX..C.............|................... 440_________________________________________________XOXOX____________________________________ 430.|...............................................XOXOX................|................... 420.|...............................................XOXOX................|................... 410.|..............................................+XOXOX................|................... 400.|.............................................+.XO.OX................|................... 390______________________________________________+__X__OX____________________________________ 380.|...........................................+...X..O.................|................... 370.|..........................................+....X....................|................... 360.|.........................................+.....X....................|................... 350.|........................................+......X....................|................... 340_________________________________________+_______X________________________________________ 330.|......................................+......X.X....................|................... 320.|.....................................+.......XOX....................|................... 310.|....................................+......X.XOX....................|................... 300.|...................................+.......XOXOX....................|................... 290____________________________________+________XOXO_________________________________________ 285.|.................................+.........XOX......................|................... 280.|................................+..........XOX......................|................... 275.|...............................+...........XOX......................|................... 270.|..............................+............XOX......................|................... 265_______________________________+_____________XOX__________________________________________ 260.|............................+..............XOX......................|................... 255.|...........................+...............XOX......................|................... 250.|.....................X....+................XOB......................|................... 245.|.....................XO..+.................XO.......................|................... 240_______________________XO_+__________________X____________________________________________ 235.|.....................XO+...................X........................|................... 230.|.....................XOX...................X........................|................... 225.|.....................XOXO..................X........................|................... 220.|...................7.X8XOX.X.X.X.....X.X...X........................|................... 215_____________________XOXOXOXOXOXOXOX___XOXOX_X____________________________________________ 210.|...................XOXOX9XOXOXOXOXAX.XOXOXOX........................|................... 205.|...............X.X.XO.OXOXOXOXO.OXOXOXO.OXOX........................|................... 200.|...............XOXOX..OXO.O.OX..O.OXOX..O.O.........................|................... 195.|.............X.XOXOX..O.....O.....O.O...............................|................... 190_______________XOXO6O_____________________________________________________________________ 185.|.......X.....XOXO...................................................|................... 180.|.......XO...+XO.....................................................|................... 175.|.......XO..+.X......................................................|................... 170.|.......XO.+..X......................................................|................... 165_________XO+___X__________________________________________________________________________ 160.|.......3OX...5......................................................|................... 155.|.....X.XOX4..X......................................................|................... 150.|.....XOXOXOX.X......................................................|................... 145.|.....XOXO.OXOX......................................................|................... 140_______XOX__OXOX__________________________________________________________________________ 138.|.....XO...OXO.......................................................|................... 136.|.....X....OX........................................................|................... 134.|.....X....OX........................................................|................... 132.|.....X....OX........................................................|................... 130_______X____OX____________________________________________________________________________ 128.|.....X....OX........................................................|................... 126.|.....X....OX........................................................|................... 124.|.....X....OX........................................................|................... 122.|.....X....O.........................................................|................... 120_______X__________________________________________________________________________________ 118.|.....X..............................................................|................... 116.|.....X..............................................................|................... 114.|.....X..............................................................|................... 112.|.....X..............................................................|................... 110_______X__________________________________________________________________________________ 108.|.....X..............................................................|................... 106.|.....X..............................................................|................... 104.|.....X..............................................................|................... 102.X....+X..............................................................|................... 100_XO__+_X__________________________________________________________________________________98.XO.+..X..............................................................|...................96.XO+...X..............................................................|...................94.XOX...2..............................................................|...................92.XOXOX.X..............................................................|...................90_1OXOXOX__________________________________________________________________________________88.XO.OXOX..............................................................|...................86.X..OXOX..............................................................|...................84.X..OXO...............................................................|...................82OX..OX................................................................|...................80OX__O_____________________________________________________________________________________78OX....................................................................|...................76O|....................................................................|...................74-9--------------------------------------------------------------------0-------------------12.80-9--------------------------------------------------------------------0-------------------12.60
Being a super-bullish stock,Pace basically follows itslong-term bullish resistanceline. The bullish resistanceline confines the pricemovements towards theupside.Bullish stocks push againstthose resistance lines likeprisoners against a fence.They try to break them to freethe way for upside moves.Again, we see how well p&f45 degree trend lines can beused for price forecasts.
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The Complete Guide to Point-and-Figure Charting
Chart 2.15 – Recovery of Xenova [XEN.L]
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