P&F Chart

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Chart Analysis

Point & Figure Horne Page Point

Point & Figure Chart BasicsIntroductionPoint & Figure charts consist of columns of X's and O's that represent filtered price movements. X-Columns represent rising prices and O-Columns represent falling prices. Each price box represents a specific value that price must reach to warrant an X or an O. Time is not a factor in P&F charting. These charts evolve as prices move. No movement in price means no change in the P&F chart. In classic 3-box reversal charts, column reversals are further filtered requiring a 3-box minimum to reverse the current column. The 3-box Reversal Method is the most popular P&F charting method. Articles in the StockCharts.com ChartSchool are base on this method. P&F charts provide a unique look at price action that has several advantages. P&F charts: Filter insignificant price movements and noise Focus on important price movements Remove the time aspect from the analysis process Make support/resistance levels much easier to identify Provide automatic and subjective trendlines

echnology Select Sector SPDR (XLK) NYSE 31-Mar-2011, 14:52 ET, daily, 0;26.07 H;26.15 L;26.02 C;26.09 V;4,010,860 Chg;-0 .. 2 0 User-Defined, (0.50 x 3) chart Bullish Price Obj. (Revised): 39.00 C StockCharts.com28.50 28.00 27.50 27.00 26.50 26.00 25.50 25.00 24.50 24.00 23.50 23.00 22.50 22.00 21.50 21.00 20.50 20.00 19.50 19.00 18.50 18.00 17 .50 17.00 16.50 16.00 15.50 15.00 14.50 14.00 13.50 13.00 12.50 12.00 11.50 11.00

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HistoryP&F charting has a long history. One of the first references to Point & Figure charting came from an anonymous writer named "Hoyle", 1M'i0 wrote The Game in Wall Street and How to Successfully Play It in 1898. Early Point & Figure Charts 'lVE!re drawn using numbers. Hence, they were simply referred to as "Figure Charts". These figure charts evolved into charts with X's and a few numbers. A.W. Cohen is credited with the classic 3-box Reversal P&F charts with X's and as. Cohen wrote several books on this "Three-Point Reversal Method" and became the editor of ChartCraft. Before computers, P&F charts were popular because it was simple to maintain a large collection of charts. Using just a pencil, a newspaper and some graph paper, P&F chartists were able to update and analyze 50 or more charts every day - in less than an hour. There is a certain feel one gets lM'ien updating chart by hand. However, this classic paper and pencil-based method was largely put aside as technology made charting easier. StockCharts.com offers three different Point & Figure charting options as 'lVE!1I the ability to scan 1000s of stocks for as

specific patterns.

Creating a P&E ChartOn a P&F chart, price movements are represented with rising X-Columns and falling Q.. Columns. Each column represents an uptrend or a downtrend of sorts. Each X or 0 occupies 'htlat is called a box on the chart. Each chart has a setting called the Box Size, 'htlich defines the price range for each box. Each chart has a second setting called the Reversal Amount that determines the amount that a stock needs to move in the opposite direction to warrant a column reversal. Whenever this reversal threshold is crossed, a new column is started right next to the previous one, only moving in the opposite direction.Afnazon.com, Inc. (AMZN) P&F PatternUselDefined. Bullish Ascending Tliple , Nasdaq Global Select II/Ikt.

31t~lal. 15:42 ET. daily. 0: 179.31. H: 181.57. L: 178.50, C: 180.495, V: 4.11\11. hg: +1.075 CTop Bleakout on 29I\I!al2011 1.0 ptsJbox 3 box leversal chart

Price Obj. (Rev.): 198.0

stocxcnarts.com

User Defined

The "reversal distance" is the box size multiplied by the reversal amount. A box size of 1 and the reversal amount of 3 would require a 3 point move to warrant a reversal (1 x 3). An X-Column extends as long as price does not move dOIM1more than the "reversal distance". Similarly, a stock in a downtrend will cause a descending Q..Column to appear. Only 'htlen the stock changes direction by more than the reversal distance will a new X-column be added to the chart.

High-Low MethodThere are two pricing methods available: the High-Low Method and the Close Method. Each method only uses one price point. Obviously, the Close Method uses the closing price only. The High-Low Method uses the high or the low, but not both. Sometimes both are ignored. Here are the rules for the High-Low method. When the current column is an X-Column (rising):o

oo

Use the high when another X can be drawn and then ignore the low. Use the low when another X cannot be drawn and the low triggers a 3-box reversal. Ignore both when the high does not warrant another X and the low does not trigger a 3-box reversal.

When the current column is an O-Column (failing):o

Use the low when another 0 can be drawn and then ignore the high. o Use the high when another 0 cannot be drawn and the high triggers a 3-box reversal. o Ignore both when the low does not warrant another 0 and the high does not trigger a 3-box reversal.PowerShares QQQ Trust (QQQ)

Nesdeq Global L: 57.15,

Mid. C: 57.398. V: 35.0M. Chg: +0.048

311111.11.15:33 ET. daily. 0: 57.25, No New P&F P attetn user-neflned. Bullish

H: 57.46,

1.0 ptslbox 3 box reverser chart

Price Obj. (Rev.): 89,0

StockChans.com

COlnstructions

I Q Understanding I ~Print

I About

P&F Alerts

I

About Price Objectives

IP

Chart Attributes:

International31!vlaf.

Business Machines (IBM)

NYSE c. 163.62. V: 2.21v1. Chg: +0.02

15:39 ET. daily. 0: 163.40. H: 164.06, L: 163.22. Low Pole Reversal on 21lvlaf2011 1.0 ptsJbox3 box reversal chart

P&F PatternUser-Defined,

Bearish Price Obj. (Rev.): 136.0

StockCharts. com

October

December

StockCharts.com P&F ChartsStockcharts.com offers three different Point & Figure charting styles: Graphical, Text and Dynamic. Graphic charts were used in the examples above. Trendlines and other indicators can be found in the Chart Overlays section just below each P&F chart. Text P&F Charts are classic old-school style with plus signs (+) marking the 45 degree trendlines. Dynamic P&F Charts allow chartists to dynamically adjust the box size, the reversal amount and draw their own trendlines. Links to the other styles can be found just above each P&F chart. Links to articles on P&F Alerts and Price Objectives can be found below each P&F chart. Click here for a live P&F chart.

Enter TIcker:

[SPY""

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or choose from: ( Update Chart)

S&P 500 SPORs (SPY) NYSE23""'.11, 16:00 ET. d.ally. 0: 128.03. H: 130.00. L: 128.32.

c. 129.66.

V: 148,41"", Chg: +0.37

,~o New P&f Patt"nbollC Ilv.",1 ohart Bullish Puee Obj. (Rev.); 108.0 Tladition.1I.3

siocxcnarts. com

09

OJlnstructions

P&F ScansP&F Pattern Alerts can be found at end of the Predefined Scans Page. These are based on daily data. StockCharts.com provides daily alerts for more than 15 P&F patterns on various exchanges, including the TSX and LSE. Some of these are sholNll in the image below. Note that there were over 100 NYSE stocks with Triple Top Breakouts.

P&F' Patterns,P&F Bull Trap Alerts P&F Bear Trap ,Alerts,

Predefined

Scans

INYSE : 11 ,: 23

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Nasdaq

J:1 :2

AMEX

: 11:12 :10:2

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Chartists can also scan for specific P&F patterns using daily data and the drop-down menu for user-defined scans. Over 20 P&F patterns and criteria are included as "Predefined Chart Patterns". Users can combined these P&F patterns with other non-P&F criteria to create truly unique scans.

(Update Criteria.)

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Learn MorePoint & Figure Charting by Thomas Dorsey:. This book starts with the basics of P&F charting and then proceeds to the key patterns. Dorsey keeps his P&F analysis simple and straight forward, much like the work of P&F pioneer AW. Cohen. As a relative strength disciple, Dorsey devotes a complete chapter to relative strength concepts using P&F charts. These concepts are


You are here: StockCharts.com)} ChartSchool Page P&F Scaling and Timefrarnes

Chart Analysis Point & Figure Home

P&F Scaling and TimeframesIntroductionEven though intraday charts are normally associated with short-term analysis, chartists may be surprised just how far back intraday data can extend on Point & Figure charts. It is this time extension into the past that determines the analytical timeframe. In general, charts that extend back just one month would be short-term oriented. Charts that extend several months would be mostly medium-term oriented. Charts that extend more than a year would be suited for long-term analysis. The amount of past data shown on a Point & Figure chart is not fixed. Instead, this look-back period is subject to the number of price reversals, which in turn are influenced by box size, reversal amount and data interval. This article will show a few different P&F settings to help chartists choose the time interval best suited for their analysis.

Basic P&F SettingsUsers can adjust the scaling method, box size and reversal amount to change the overall timeframe covered on the chart. This article is not designed to explain the different scaling methods. Please see our See our P&F support article for details other charting options Too keep it simple, this article will use Graphical P&F charts percentage of the scaling method and a classic reversal amount (3). Percentage scaling means the box size will be a specific percentage of price. Interval refers to the data periods (daily, 60 minute, 30 minute etc ... ). The box-size and data interval will be changed to affect the look-back period on the P&F chart. Basically, P&F charts with smaller box sizes and shorter data intervals have shorter look-back periods. P&F charts with larger box sizes and longer data intervals have longer look-back periods.

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I ~Print

I About

P&F Alerts

I

About Price Objectives

I Past

Data

The Russell 2000 P&F chart shows the key settings in the Chart Attributes section and the Chart Scale section. Notice how the numerical value of the boxes changes. The difference between the top two boxes is 8.36 (844.04 - 835.68) and the difference between the bottom boxes is 4.69 (473.94 - 469.25). Despite different sizes in absolute

numbers, the boxes are equal in percentage terms (1%). 8.36 is 1% of 835.68 and 4.69 is 1% of 469.25.

Percent versus User-DefinedPercentage based scaling allows a one-size-fits-all setting for a group of charts. Google (GOOG) trades above $600 a share and Intel (INTC) trades below $25 per share. Obviously, a $1 box would produce relatively few reversals for Intel and many for Google. Intel rarely moves more than 2$ per week, while Google rarely moves less than $10 per week. Percentage scaling levels the playing field. Setting the percentage box size at 1% means a 1% move in Intel will be around .21 (21 Cents) and a 1% move in Google will be wonh around 6 (6 Dollars). The charts below show Intel with a Percentage box size (1%) and user-defined box size (20 cents). Intel Corp. (INTC)Nesdeq Global Select Mkt. C: 21.15, V: 13.91v1,Chg: 0.06

OSMal. 10:27 ET. daily. 0: 21.26, H: 21.26, L: 21.02. No New P&F' P ettem

StockCharts. com

Intel Corp. (INTC)P&F Pattern

Nesdeq Global Select Mkt.

OSMal. 16:00 ET. daily. 0: 21.26, H: 21.26, L: 21.02.

c. 21.13,

V: 57.01v1, Chg: 0.08

Double Bottom Bleakdown on 07-l\Ilar2011

StockCharts. com Daily UserDefined 20 Cent Box Size

The user-defined scaling method sets the box size at a specific value. No matter how high or low the price, this value stays the same. A box of 1 would be worth 1 poi nt on the S&P 500 and $1 for a stock or ETF. A box worth .50 would be worth a 1/2 point on the S&P 500 and 50 cents for stock or ETF. A smaller box size (.50) llllill result in more reversals and a shorter look-back period. A larger box size (1.00) llllill result in fewer reversals and a longer look-back period. Chartists preferring a set box size can usually set the box size at around 1% of the current price. Intel is trading around 21 and would warrant a box size of 21 cents. Google is trading around 592 and would warrant a box size of $6. These numbers can even be rounded to allow for easier counting. The charts below show Google llllith a percentage box size (1%) and a user-defined box size of 5 points (Dollars). There are some differences between the percentage chart above and user-defined charts below, but these differences are small and the charts are quite similar overall.

6oogle,lnc. (600G)

Nasdaq Global S.I.c'

Mkt.

stocxcnarts. com

6oogle,lnc. (6006)

Nasdaq Global S.I.c'

Mkt. C: 592.31, V: 2.2M. Chg: +0.65

08flll'H. 16:00 ET. daily. 0: 592.93.

H: S97,9a. L: 590.20.

P&F Patter.lPrelim. Bearish

Double Bottom Breakdown on 07Mar2011

stocxcnarts. com

Daily User-Defined 5 Dollar Box Size 3 Box Reversal

9-24 Month ChartsThe amount of time shOIM)on a P&F chart depends on the number of 3-box reversals on the price chart. On a P&F chart with 1% boxes, a 3-box reversal occurs each time the price reverses by 3%. The reversal amount is actually a little above 3% for advances and just below 3% for declines. This is because 3% of 60 (1.8) is more than 3% of 57 (1.71). Securities that trade sideways with numerous 3% reversals INiIi fill up the P&F chart quite quickly and cover a shorter timeframe. Securities that develop trends and forge a modest number of 3% reversals INiIi cover more ground (time) on a P&F chart. Generally speaking, a 3-box reversal P&F chart with 1% box size will extend 9-24 months. Increasi ng the box size INiIi increase the time covered on the chart. The first P&F chart below shows VF Corp (VFC) based on a 3-box reversal and 1% box size. This chart extends from August 2009 to March 2011 (around 18 months). The red 9 on the far left marks the end of August and beginning of September. The second chart shows Urban Outfitters with the same settings, but the chart extends from July

2010 to March 2011, just nine months.Urban Outfrtters, P&F Patter.)Lon

1"1' (URBC)

Nasdaq Glob.al Select fvlkt.

OgMa,2011. 16:00 E . daily.

: 31.54. H: 31.90. L: 30.91. C: 31.17. V: 7149914. Chg: 0.49 (.1.55*")

Tail Down on 08Ma,2011

Pelcentage. 1.0%Jbox3 box levers.)1 chart Prelim. Bearish Price Obj. (Rev.): 22.66

stockcnerts.com

VFCorp (VFC)

NYSE

09tlllal. 16:00 ET'daily,IO: 96.35, H:98.08. L: 95.85, C: 97.65, V: 1.2M. Chg: +1.59No New P&F' Pettem Pelcentage. 1.0%Jbox3 box leversal chart

.8

stocxcnarts. com

High-Low MethodBefore moving on to intraday data, it is important to understand the difference in P&F pricing methodologies. There are

two

pricing methods available: the High-Low Method

and the Close Method. Each method only uses one price point. Obviously, the Close Method uses the closing price only. The High-Low Method uses the high or the low, but not both. Sometimes both are ignored. Here are the rules for the high-low method. When the current column is a column of X's (advance):o

oo

Use the high when another X can be drawn and then ignore the low. Use the low when another X cannot be drawn and the low triggers a 3-box reversal. Ignore both when the high does not warrant another X and the low does not trigger a 3-box reversal.

UrbanOlrtfrtter~URBN)ogr~1af. 6:00 ET~O: 1 ~ Percenteae. O.5%Jbox3 . ',.

Nesdeq Global

Select Mkt.

30,96. H: 31.18, L: 30,93. C: 31.17. V: 1.4M. Chg: +0.21 akdown on 08Mal2011 chart box reverser


StockCharts. com

End December Begin

3 months

VFCorp(VFC) P&F Patter'l

NYSE

OgllI1af2011. 16:00Tli

El, 60IvlN.P:Ie To

97.87. H: 98.08. L: 97.60. C: 97.65, V: 332127. Chg: 0.21 (0.21%)

Breakout on 0811I1a,2011

StockCharts.com

5.6 months

End Octoher November

ConclusionsWhile daily P&F charts are best suited for long-term analysis, intraday intervals are often needed to achieve a medium-term outook. The next analytical step (short-term) would be to decrease the interval and box size even further. A 15-minute chart using a box size of .25% would cover around one month of data for many securities. Starting analysis with the longest look-back period allows chartists to define the bigger trend. Keep this in mind when moving to shorter periods. Trading results can be improved by looking for short-term bullish setups when the long-term trend is up. The settings shown above are meant as general guidelines. Chartists are invited to tweak these settings to find those that produce charts best suited for their analysis.

Creating P&E Charts

Stockcharts.com offers three different Point & Figure charting styles: Graphical, Text and Dynamic. Graphic charts were used in the examples above. Trendlines and other indicators can be found in the Chart Overlays section just below each P&F chart. Text P&F Charts are classic old-school style with plus signs (+) marking the 45 degree trendlines. Dynamic P&F Charts allow chartists to dynamically adjust the box size, the reversal amount and draw their own trendlines. links to the other styles can be found just above each P&F chart. Links to articles on P&F Alerts and Price Objectives can be found below each P&F chart. Click here for a live P&F chart.

Enter TIcker: Spy or choose froLm-:----' ( Update Chart)S&P 500 SPDRs (SPY)No New P&F Pattem Traditional. 3 box reversal chert

I

in:NYSE

23llIlal, 16:00 ET. daily. 0: 128.93. H: 130.00. L: 128.32. C: 129.66, V: 148.41\11. hg: +0.37 C

Bullish Price Obj. (Rev.): 196.0

stockcnarts.com

CEhnstructions Q

P&F ScansP&F Pattern Alerts can be found at end of the Predefined Scans Page. These are based on daily data. StockCharts.com provides daily alerts for more than 15 P&F patterns on various exchanges, including the TSX and LSE. Some of these are shown in the image below. Note that there were over 100 NYSE stocks with Triple Top Breakouts.

P&F Patterns

Predefined Scans

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Nasd!a~

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AMEX,I I I

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Chartists can also scan for specific P&F patterns using daily data and the drop-down menu for user-defined scans. Over 20 P&F patterns and criteria are included as "Predefined Chart Patterns". Users can combined these P&F patterns with other nonP&F criteria to create truly unique scans.

( Update Criteria)

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Further StudyPoint & Figure Charting by Thomas Dorsey:. This book starts with the bastes of P&F charting and then proceeds to the key patterns. Dorsey keeps his P&F analysis simple and straight forward, much like the work of P&F pioneer A.W. Cohen. As a relative strength disciple, Dorsey devotes a complete chapter to relative strength concepts using P&F charts. These concepts are tied in with market indicators and sector rotation tools to provide investors with all they need to construct a portfolio. There is also a section on using P&F charts with ETEs. The Definitive Guide to Point and Figure by Jeremy du Plessis:. This book lives up to its title and is required reading for the Chartered Market Technician exam. Chartists can learn about t-box P&F patterns/counts, 3-box patterns/counts and various trading strategies. du Plessis also shows how to apply P&F charting techniques to other analysis tools, such as relative strength and Fibonacci retracements. Plenty of real world examples are provided throughout the text.

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You are here: StockCharts.com Page P&F Trendlines

ChartSchool

Chart Analysis Point & Figure Horne

P&F TrendlinesIntroductionTrendlines on 3-box Reversal P&F charts are drawn at 45 degrees up and 135 degrees down. An ascending trendline is called a Bullish Support Line and a descending trendline is called a Bearish Resistance Line. Because these lines are drawn at specific angles, they represent a specific rate of ascent or descent. Chartists can use P&F trendlines to define the overall trend and look for signals in the direction of that trend.

Changing TrendlinesThere is always a Bullish Support Line or Bearish Resistance Line present. After a break above the Bearish Resistance Line, a Bullish Support Line will be drawn from an important low. Extending up at a 45 degree angle, this line will remain in force until broken. Once broken, the Bullish Support Line will cease and a new Bearish Resistance Line will be drawn from an important high near the break. Extending down at a 135 degree angle, this line will remain in force until broken.

Noble Drilling Corp. (NE)28Maf2011. 16:00 ET. daily. No New P&F' P attern

NYSE

Bearish Resistance lines (red) Bullish Support lines (blue)

Traditional. 3 box reversal chart Bullish Price Obj. (Rev.): rlllet(41.0)

StockChans. com

Break

The chart above shows Noble Drilling (NE) with four trendlines. The Bearish Resistance Line extended through 2008 and was broken in early 2009 (red 2). At this point, the Bearish Resistance Line ended and a Bullish Support Line was drawn from the low. This line extended the rest of the year and was broken in April 2010 (between red 4 and red 5). A new Bearish Resistance Line was then drawn from the high and remained until the October 2010 break (red A).

Bullish Support LineIn general, an uptrend is present when prices are above the Bullish Support Line. This line extends up at a 45 degree angle to insure a certain rate of ascent. Sideways price action or a slower rate of ascent will lead to a trendline break. According to P&F theory, bullish signals should be taken when above this trendline and bearish signals should be ignored. This is trading in the direction of the bigger trend.

Agilent Technologies, Inc. (A)

NYSE Chg: 0.08 (0.1804)

28Maf2011. 16:00 ET. daily. 0: 44.24. H: 44.67. L: 43.87. C: 43.96, V: 2984107. No New P&F' P attern Traditional. 3 box reversal chart Bullish Price Obj. (Rev.): 59,0

stockcnens.com Bearish Signal Reversed

Above Bullish Support Line (blue)

The chart above shows Agilent (A) with a blue Bullish Support Line. There were at least three bullish signals above this trendline. There were

two

Triple Top Breakouts in

2009 and then a Bearish Signal Reversed Breakout at end of 2010. The red "A" on the chart marks the Double Top Breakout that confirms the Bearish Signal Reversed pattern. This red "A" also marks the month of October.

Bearish Resistance LineA downtrend is present lMlen prices remain below the Bearish Resistance Line. This line extends down at a 135 degree angle, lMlich is just a 45 degree angle turned upside down (180 - 45

= 135). This angle requires

a certain rate of descent

Sideways price action or a slower decline would lead to a trendline break. According to P&F theory, bearish signals are preferred lMlen below the Bearish Resistance Li ne. Bullish signals should be ignored or used to take profits on short positions.

QUALCOMM Inc. (QCOM) Nasdaq Global S.I.c' Mkt. 28Mal. 16:00 ET. daily. 0: 52.95, H: 53.28, L: 52.10, C: 52.18, V: 10.21vl, Chg: 0.57 No New P&F P atternTraditional. 3 box reversal chart Bullish Price Obj. (Rev.): 84.0

stockcnens.com

Below Bearish Resistance line (red)

BreakDown

The chart above shows Qualcom (QCOM) with a Bearish Resistance Line in the latter part of 2008. Well after this line was established, the stock forged a Spread Triple Bottom Breakdown and a Triple Top Breakdown in October. The red "A" marks the beginning of October and the red "B" marks the beginning of November.

Trendline AdjustmentsIt ain't broken until it's broken. There are times when an ()'Column declines right tothe trendline and reverses back up. Technically, this is not a trendline break. However, a new trendline is required to reflect this test. The chart below shows rvlcDonalds (MCD) touching trendlines three times in 2009. A red 3, a red 5 and an 0 printed in the boxes that coincided with the trendlines. Because these trendlines were not broken, the line shifted down one box to reflect an adjusted rate-of-ascent.

McDonalds Corp. (MCD)

NYSE Chg: 0.25 (0.33%)

28Maf2011. 16:00 ET. daily. 0: 75.55. H: 75.63. L: 75.00. C: 75.00. V: 3081829. No New P&F' P attern Traditional. 3 box reversal chart


stockcnens.com

Trendline Touches, But not Break

The same holds for Bearish Resistance Lines. Sometimes an advance extends to the same box as the Bearish Resistance Line, but does not break this trendline. After the subsequent downturn, a new Bearish Resistance Line is added based on this new reaction high. The chart below shows CME Group (CME) hitting the Bearish Resistance Line a few times in the middle of 2010. Despite challenging these trendlines. there was never an actual breakout, After the reversal back down, a new trendline was drawn one square higher.

CME Group Inc. (CME) P&F PattemTfaditional,3

Nesdeq Global Select Mkt.

28flllal. 16:00 ET. daily. 0: 295.41. H: 298.18. L: 294.57. c. 295.50. V: 42S.2K. Chg: 0.36Low Pole Reversal on 23!v1af2011 box reverser chart


StockCharts. comBut not Break

ConclusionsTrendlines drawn on 3-box Reversal P&F charts are more objective than trend lines drawn on bar or line charts. Chartists can use this objectivity to establish a trend biased based on the trendline displayed. A bullish bias is present when the current trendline is a Bullish Support Line. A bearish bias is present with a Bearish Resistance Line. Daily P&F charts cover a fairly long timefrarne. Chartists can use the daily P&F chart to establish a big trend bias and then turn to 30 minute P&F charts to look for signals in harmony with that trend.

Creating P&E ChartsStockcharts.com offers three different Point & Figure charting styles: Graphical, Text and Dynamic. Graphic charts were used in the examples above. Trendlines and other indicators can be found in the Chart Overlays section just below each P&F chart Text P&F Charts are classic old-school style with plus signs (+) marking the 45 degree trendlines. Dynamic P&F Charts allow chartists to dynamically adjust the box size, the reversal amount and draw their own trendlines. Links to the other styles can be found just above each P&F chart. Links to articles on P&F Alerts and Price Objectives can be found below each P&F chart. Click here for a live P&F chart.

Enter TIcker: Spy or choose froLm-:-----' ( Update Chart )S&P 500 SPDRs (SPY)No New P&F P attem Traditional. 3 box reversal chert NYSE

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23llIlal, 16:00 ET. daily. 0: 128.93. H: 130.00. L: 128.32. C: 129.66. V: 148.41\11.Chg: +0.37


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Chart Overlays: If Trend Lines( - None( -- None --

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P&F ScansP&F Pattern Alerts can be found at end of the Predefined Scans Page.

StockCharts.com

provides daily alerts for more than 15 P&F patterns on various

exchanges, including the TSX and LSE. Some of these are shown in the image below. Note that there were over 100 NYSE stocks with Triple Top Breakouts.

P&F Patterns,P&F Budl Tmp rueris P&r: Bear Trap Aleris,

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You are here: StockCharts.com Page P&F Bullish Breakouts

ChartSchool


P&F Bullish BreakoutsIntroductionThere are five bullish breakout P&F patterns. The most basic P&F buy signal is a Double Top Breakout, which occurs when an X-Column breaks above the high of the prior X-Column. From this basic pattern, the bullish breakout patterns become more complex and wider. The wider the pattern, the better established the resistance level and the more important the breakout. This article will look at the five key breakout patterns in detail and then show measuring techniques for Price Objectives.

Double Top BreakoutIn the P&F world, Double Top Breakouts are bullish patterns that are confirmed with a resistance break. With bar charts, on the other hand, Double Top Breakouts are bearish patterns that are confirmed with a support break. These patterns are not contradictory. They are simply different patterns with similar names.

As noted above, the most fundamental P&F buy signal is when an X-Column breaks above the high of the prior X-Column. These two columns are separated by an 0Column. X-Columns denote rising prices, while O-Columns signify falling prices. The first rising X-Column establishes direction. The middle O-Column represents a bounce that establishes support. The third X-Column triggers the higher high. The ability to break above the prior high shows strength associated with an uptrend. As the most common signal in the P&F universe, Double Top Breakouts are also the most prone to whipsaw and failure. Double Top Breakouts should be viewed in the context of the bigger picture. It is important to employ other aspects of technical analysis when using signals as common as Double Top Breakouts. The chart below shows Diamond Offshore (DO) with several Double Top Breakouts over the last two years.

Diamond Offshore Drilling,lnc. (DO) P&F Pattern

NYSE

10rlllal2011. 9:52 ET. daily. 0: 74,95, H: 74.95, L: 73.77. C: 73.92. V: 167537. Chg: 1.99 (-2.62%) High Pole Walning on 10!v1ar2011 Traditional. 3 box reversal chart Bullish Price Obj. (Rev.): rlllet (76.0)

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Double Top Breakouts

Triple Top BreakoutThe Triple Top Breakout takes the Double Top Breakout one step further by adding a resistance column. Two consecutive X-Columns define resistance with reaction highs. The third X-Column breaks above the prior Columns and

two

equal

two

X-Columns to forge

the Triple Top Breakout. Classic Triple Top Breakouts are five columns wide: three X-

two

O-Columns.

These patterns can mark reversal breakouts or continuation breakouts. Distinguishing between reversal and continuation depends on the prior move. A Triple Top Breakout that forms as a base after a decline would be deemed a reversal pattern. A Triple Top Breakout that forms as a consolidation after an advance would be viewed as a continuation pattern.

Computer Sciences Corp. (CSC) P&F PatternTraditional.

NYSE

1Qllllar2011. 10:07 ET. daily. 0: 47.47. H: 47.69, L: 47.10, C: 47.16, V: 91345. Chg: 0,92 (-1.91.4)High Pole Warning on OQFeb2011 3 box reversal chart

Bullish Price Obj. (Rev.): 79,0

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Triple TopBreakout

The chart above shows Computer Sciences (CSC) with a reversal Triple Top Breakout at the end of 2008 and then

two

continuation Triple Top Breakouts. While it

is sometimes difficult to distinguish between reversal patterns and continuation patterns, the Triple Top Breakout itself is easy to identify.

Spread Triple Top BreakoutAs its name implies, the Spread Triple Top Breakout is an expanded version of the Triple Top Breakout A Spread Triple Top Breakout contains at least

two

extra and an

columns, which means it is at least seven columns wide. An extra ~Column

extra X-Column form highs below the actual breakout or resistance level. These columns in effect add space or width to the Triple Top Breakout. As with a normal Triple Top Breakout, a Spread Triple Top Breakout is confirmed with a break above the highs of the than

two

X-columns. Ideally, a Spread Triple Top Breakout forms as a

Triple Top Breakout with

two

extra columns. In reality, this pattern can form with more

two

extra columns.

Monsanto Co. (MON)P&F PatternTraditional. Descending

NYSE Triple Bottom Breakdown on 10Mar2011

10llIlal2011. 9:54 ET. daily. 0: 68.88. H: 68.88, L: 68.35, C: 68.65, V: 572934. Chg: 0.75 (.1.08.4)3 box reversal chart


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Spread Triple Top Breakout

L-----------------------------------------------~The chart above shows Monsanto with

two

Spread Triple Top Breakouts. The first one

(2009) is suspect because of the distance between the first two X-Columns and the breakout X-Column. In fact, there is a clear downtrend between these columns. The second Spread Triple Top Breakout is a continuation pattern because is formed after a long X-column. The pattern is seven columns wide, lMlich makes it the ideal length for a Spread Triple Top Breakout.

Ascending Triple Top BreakoutAn Ascending Triple Top Breakout is basically back-to-back Double Top Breakouts. These breakouts form three X-Columns that ascend with each breakout. Because there are three X-Columns and

two

O-Columns, the pattern is just as wide as a

classic Triple Top Breakout. The ability to forge back-to-back higher highs shows underlying strength that is indicative of an uptrend. As with the other patterns, this Ascending Triple Top Breakout can form as a continuation or reversal pattern.

Rockwell Collins (COL) "YSE1QMaf2011. 9:56 ET. daily. 0: 63.90. H:63.95. L:63.33, C: 63.80, V: 63148, No New P&F' P attern Traditional. 3 box reversal chart Bullish Price Obj. (Rev.): 80.0

Chg: 0.82 (.1.27~)

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Trilile Top Breakout

The chart for Rockwell Collins (COL) shows an Ascending Triple Top Breakout at the beginning of 2010. The red lines mark back-to-back Double Top Breakouts. Also notice that the stock established support with

two

equal O-Columns during the pattern

formation. The combination of solid support and higher highs reinforced the strength of the pattern. A failed Spread Triple Top Breakout is shown on the far left.

Quadruple Top BreakoutThe Quadruple Top Breakout is just like the Triple Top Breakout, only with an extra XColumn to mark resistance and an extra O-Column to widen the pattern. Three consecutive X-Columns define resistance with three equal highs. The fourth XColumn breaks above the prior three X-Columns to forge the Quadruple Top Breakout All told, Quadruple Top Breakouts are seven columns wide with four XColumns and three O-Columns. These patterns can mark reversal breakouts or conti nuation breakouts.

Corning, Inc. (GLW)14Mar,

NYSE

16:00 ET. daily. 0: 21.19, H: 21.58, L: 21.15, C: 21.42. V: 10.01v1,Chg: +0.11 Triple Top Breakout on 13Dec201Q

P&F Patter.l

Traditional, 3 box reversal chart Prelim. Bullish Price Obj. (Rev.): 34.5

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Breakout

The chart above shows Corning (GLW) with a reversal Quadruple Top Breakout in February 2009. This reversal pattern also resembles an inverse head-and-shoulders. The second Quadruple Top Breakout is a bullish continuation pattern. Whether conti nuation or reversal, resistance levels are clear with a Quadruple Top Breakout and the breakout point is definitive.

Measuring TechniqyesFirst and foremost, be careful with Price Objectives. They are really just rough guidelines. Chartists should use other aspects of technical analysis to confirm objectives and continuously monitor the state of the trend/breakout The horizontal count method can be applied to Triple Top Breakouts, Ascending Triple Top Breakouts, Spread Triple Top Breakouts and Quadruple Top Breakouts. Simply measure the width of the pattern, multiply by the box size and then by the reversal amount. Add this total to the pattern low for a Price Objective. The wider the pattern, the bigger the expected move. Triple Top Breakouts are five columns wide (3 Spread Triple Top Breakouts are seven columns minimum. The vertical count method can be applied to Double Top breakouts. After the breakout, chartists must wait for a 3-box reversal to FIX the height of the breakout

x-

Columns and 2 O-Columns), Quadruple Top Breakouts are seven columns wide and

column. The breakout column is subject to change until there is a reversal. This reversal is considered a pullback as long as it does not extend too deep. Count the number of filled boxes in the breakout column. multiply by the box size and then by the reversal amount Add this product the pattern low for an upside Price Objective.Intuit,lnc. (INTU)Nesdeq Global Sele ct Mkt.

14M;u2011, 16:00 ET. daily. 0: 49.24. H: 49.98. L: 48.84, C: 49.43, V: 2190471, Chg: 0.03 (-0.06%)

P&F PattertlT'aditional,3

High Pole Walning on 10Mar2011 box reversal chart

Bullish P,ice Obj. (Rev.): rv1et(41.0)

StockChal1s.com

7 X 1 X 3 = 21 34 + 21 = 55

4.5 X 3 = 13.5 18 + 13.5 = 31.5

The chart above shows Intuit (INTU) with three different patterns and price objectives. The first is a Double Top Breakout. The height of the breakout column is 7 boxes, but these boxes have different sizes (50 cents below 20 and $1 above 20). Therefore. chartists must simply subtract the high from the low of the breakout column to measure the height (23 - 18.5

= 4.5).

Multiply this height by the reversal amount (3)

and add the total to the low of the pattern (lowest O-Column) for the Price Objective. The Triple Top Breakout and Quadruple Top Breakout use the horizontal count method. First. the width of the pattern is multiplied by the box size and reversal amount Second. this total is added to the low of the pattern (lowest O-Column). Establishing a Price Objective only covers the reward part of the risk-reward equation. Chartists should also study the chart to assess risk. A move below support or the pattern low would clearly negate a breakout. The box just below the pattern low often marks the worst-case level for a pattern failure. Similarly, a Double Bottom Breakdown or a contradictory P&F pattern would argue for a reassessment. There

Enter TIcker: Spy or choose froLm-:----' ( Update Chart )S&P 500 SPDRs (SPY)No New P&F P attem Traditional. 3 box reversal chert NYSE

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P&F ScansP&E Pattern Alerts can be found at end of the Predefined Scans Page. StockCharts.com provides daily alerts for more than 15 P&E patterns on various exchanges, including the TSX and LSE. Some of these are shown in the image below. Note that there were over 100 NYSE stocks with Triple Top Breakouts.

P&F Pattarns,P&F Budl Tmp rueris

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You are here: StockCharts.com ChartSchool Page P&F Bearish Breakdowns


P&F Bearish BreakdownsIntroductionThere are five bearish breakdown P&F patterns. In fact, these five are the exact opposite of the five bullish breakdown patterns. The most basic P&F sell signal is a Double Bottom Breakdown, which occurs when an O-Column breaks below the low of the prior O-Column. From this basic pattern, the bearish breakdown patterns become more complex and wider. The wider the pattern, the better established the support level and the more important the subsequent breakdown. This article will look at the five key breakdown patterns in detail and then show measuring techniques for Price Objectives.

Double Bottom BreakdownIn the P&F world, Double Bottom Breakdowns are bearish patterns that are confirmed with a support break. With bar charts, on the other hand, Double Bottoms are bullish patterns that are confirmed with a resistance break. These patterns are not contradictory. They are simply different patterns with similar names.

As noted above, the most fundamental P&F sell signal is when an O-Column breaks below the low of the prior O-Column. These two columns are separated by an XColumn. O-Columns denote falling prices, while X-Columns signify rising prices. The first falling O-Column establishes direction. The middle X-Column represents a bounce that establishes resistance. The third O-Column triggers the lower low. The inability to hold the prior low shows weakness associated with a downtrend. As the most common signal in the P&F universe, Double Bottom Breakdowns are also the most prone to whipsaw and failure. Double Bottom Breakdown signals should be viewed in the context of the bigger picture. It is important to employ other aspects of technical analysis when using signals as common as Double Bottom Breakdowns. The chart below shows Avery Dennison (AVY) with several Double Bottom Breakdowns over the last few years.

Avery Dennison Corp. (Avy)

NYSE

15llIlal. 12:07 ET. daily. 0: 40.49, H: 40,91. L: 40.30, C: 40.638, V: 320.0K. Chg: 1.052

P&F PatternTraditional.

High Pole Warning on 03Feb2011

3 box reversal chart


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Double Bottom

Triple Bottom BreakdownThe Triple Bottom Breakdown takes the Double Bottom Breakdown one step further by adding another support column. Two consecutive O-Columns define support INith two equal lows. The third O-Column breaks below the lows of the prior two O-Columns to forge the Triple Bottom Breakdown. Classic Triple Bottom Breakdowns are five columns INide: three O-Columns and two X-Columns. These patterns can mark reversal breakdowns or continuation breakdowns. Distinguishing between reversal and continuation depends on the prior move. A Triple Bottom Breakdown that forms as a top after an advance would be deemed a reversal pattern. A Triple Bottom Breakdown that forms as a consolidation after a decline would be viewed as a continuation pattern.

Dupont Co. (DO)15llIlar2011.

"YSEChg: 0.58 (1.09%)

12:13 ET. daily. 0: 51.70, H: 52.50, L: 51.30, C: 52.44. V: 2862735. High Pole Warning on 11!v1ar2011

P&F Patter.l

Traditional. 3 box reversal chart Bullish Price Obj. (Rev.): tv1et(54.5)

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The chart above shows Dupont (~O) with a reversal Triple Bottom Breakdown in the first half of 2008 and then a continuation Triple Bottom Breakdown in the second half. While it is sometimes difficult to distinguish between reversal patterns and conti nuation patterns, the Triple Bottom Breakdown itself is easy to identify with a clear support break.

Spread Triple Bottom BreakdownAs its name implies, the Spread Triple Bottom Breakdown is an expanded version of the Triple Bottom Breakdown. A Spread Triple Bottom Breakdown contains at least

two

extra columns, wtIich means it is at least seven columns wide. An extra X-Column

and an extra O-Column form lows above the actual support level or breakdown point These columns in effect add space or width to the Triple Bottom Breakdown. As with a normal Triple Bottom Breakdown, a Spread Triple Bottom Breakdown is confirmed with a break below the lows of the two O-columns. Ideally, a Spread Triple Bottom Breakdown forms as a Triple Bottom Breakdown with only

two

extra columns. In

reality, this pattern can form with more than two extra columns. International Paper Co. (IP)P&F PatternTraditional,3 NYSE

15Mar, 12:30 ET. daily. 0: 24.93, H: 25.675. box reversal chart

L: 24.88, C: 25.65. V: 2.Sfvl, Chg: 0.29

High Pole Warning on 15Mar2011


StockChans.com

Spread Triple Bottom BreakDown

Bottom

~----------------------------------------------~The chart above shows International Paper with two Spread Triple Bottom Breakdowns. The first one in 2008 marked a continuation of the downtrend. The second Spread Triple Bottom Breakdown triggered in August 2010, but resulted in a whipsaw (bad signal). First, the breakdown did not hold long. Second, the X-Column broke above the high of the breakdown column (O-Column).

Descending Triple Bottom BreakdownA Descending Triple Bottom Breakdown is basically back-to-beck Double Bottom Breakdowns. These breakdowns form three O-Columns that move lower and lower with each breakdown. Because there are three O-Columns and two X-Columns, the pattern is just as wide as a classic Triple Bottom Breakdown. The ability to forge back-to-back lower lows shows underlying weakness that is indicative of a downtrend. As with the other patterns, this Descending Triple Bottom Breakdown can form as a conti nuation or reversal pattern.

Monsanto Co. (MON)

NYSE

Bearish Price Obj. (Rev.): Met (65.0)

Triple Bottom Breakdown

The chart for Monsanto shows three Descending Triple Bottom Breakdowns. The first

two

occurred after a Triple Bottom Breakdowns (blue lines), which makes then

conunuauon patterns. The third formed after an advance that peaked in early 2011. This is a reversal pattern.

Quadruple Bottom BreakdownThe Quadruple Bottom Breakdown is just like the Triple Bottom Breakdown, only with an extra O-Column to mark support and an extra X-Column to widen the pattern. Three consecutive O-Columns define support with three equal lows. The fourth 0Column breaks below the lows of the prior three O-Columns to forge the Quadruple Bottom Breakdown. All told, Quadruple Bottom Breakdowns are seven columns wide with four O-Columns and three X-Columns. These patterns can mark reversal breakdowns or continuauon breakdowns.

FedEx Corp. (FDX)

NYSE Triple Bottom Breakdown on 15Mar2011

15llIlal2011. 12:08 ET. daily. 0: 86.02. H: 88.92. L: 85.97. C: 88.87. V: 1586539, Chg: +0.24(0.27")

P&F Patter.lTraditional.

Descending



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Quadruple Bottom

The chart above shows FedEx (FDX) with a reversal Quadruple Bottom Breakdown in May 2010. This reversal pattern also resembles a head-and-shoulders. Notice the relatively equal highs for the shoulders and the spike high for the head. Confirmation is clear with the Quadruple Bottom Breakdown.

Measuring TechniquesFirst and foremost. be careful with Price Objectives. They are really just rough guidelines. Chartists should use other aspects of technical analysis to confirm objectives and continuously monitor the state of the trend/breakdown. The horizontal count method can be applied to Triple Bottom Breakdowns, Descending Triple Bottom BreakdolM1s, Spread Triple Bottom Breakdowns and Quadruple Bottom Breakdowns. Si mply measure the width of the pattern, multiply by the box size and then by 2/3 the reversal amount. Tom Dorsey and A. W. Cohen advocated 2/3, but some P&F chartists simply use the full reversal amount. Subtract this total from the pattern high for a Price Objective. The wider the pattern, the bigger the expected move. Triple Bottom Breakdowns are five columns wide (3 O-Columns and 2 X-Columns), Quadruple Bottom Breakdowns are seven columns wide and Spread Triple Bottom Breakdowns are seven columns minimum. The vertical count method can be applied to Double Bottom Breakdown Breakdowns, After the breakdown, chartists must wait for a 3-box reversal to FIX the height of the

breakdown column. The breakdown column is subject to change until there is a reversal. This reversal is considered a mere bounce as long as it does not extend too far. Count the number of filled boxes in the breakdown column, multiply by the box size and then by 2/3 the reversal amount. Subtract this product from the pattern high for a downside Price Objective.Monsanto Co. (MON) P&F PatternTraditional, Descending NYSE L: 64.29, C: 67.81, V: 4.61v1, Chg: +0.75 Triple Bottom Breakdown on 10Ma,2011

15llIlal. 16:00 ET. daily. 0: 64.88, H: 68.407. 3 box reversal chart

Bearish Price Obj. (Rev.): Met (65.0)

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Bottom BreakDown 5 x 1 x 2 = 10 85 -10 = 70

Triple Breakdown 5 x 1 x 2 = 10 82 10 = 72 Double Bottom Breakdown 9 x 1 x 2 = 18 -18 = 44 Triple Bottom Breakdown 5 x 1 x 2 = 10 75 -10 = 65

The chart above shows Monsanto (MON) with four bearish breakdown patterns and four downside price objectives. The blue arrows mark the pattern high, from which the extension estimate is subtracted. The first. a Descending Triple Bottom Breakdown, came just after a Triple Bottom Breakdown. Even though the pattern is near the top, it is considered a continuation pattern because it follows the previous breakdown. The second, a Triple Bottom Breakdown, is clearly a reversal pattern because it formed at the prior high. The third, a Double Bottom Breakdown, formed withi n a downtrend. The vertical count method was used to find a price objective of 44, which missed the bottom by one box. The most recent pattern is a Descending Triple Bottom Breakdown with a downside price objective of 65. Establishing a Price Objective only covers the reward part of the risk-reward equation. Chartists should also study the chart to assess risk. A move above


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Predefined Scans

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Further Study


You are here: StockCharts.com Page P&F Signal Reversed

ChartSchool


P&F Signal ReversedIntroductionAs their names imply, the Bullish Signal Reversed and Bearish Signal Reversed patterns reverse existing trends with a counter signal. A Bullish Signal reversed occurs when a series of higher highs is reversed with a Double Bottom Breakdown. A Bearish Signal Reversed occurs when a series of lower lows is reversed with a Double Top Breakout. As with many P&F patterns, these patterns can form as reversals or continuation patterns. As a continuation pattern, a Bullish Signal Reversed looks similar to a rising flag breakdown on a bar chart, while a Bearish Signal Reversed looks similar to a falling flag breakout.

Bullish Signal ReversedA Bullish Signal Reversed pattern starts with a series of higher highs and higher lows. X-Columns denote rising prices and O-Columns denote falling prices. A higher high forms when an X-Column moves above the high of the prior X-Column. A higher low forms when an O-Column holds above the low of the prior O-Column. This combination of higher highs and higher lows forms an uptrend, which is the "bullish signal". It takes at least two successive higher highs to have an uptrend working. The first XColumn sets the initial high and two subsequent X-Columns forge successive higher highs. Each X-Column is followed by an O-Column or decline. The second O-Column forms a higher low by holding above the low of the first O-Column. The "reversed" signal occurs when the most recent O-Column breaks below the low of the prior 0Column. The bullish signal (uptrend) has been reversed with a Double Bottom Breakdown. The chart below shows Lam Research (LRCX) with a pair of Bullish Signal Reversed patterns. The first formed with Breakdown.

two

higher highs (green arrows) followed by a Double

Bottom Breakdown. The second formed with five higher highs and a Double Bottom

Lam Research Corp. (LRCX) P&F PatternT,aditional.3

Nasdaq Global select Mid.

16Mar2011. 16:00 ET. daily. 0: 51.88, H: 52.67. L: 50.50. C: 51.06, V: 2119841. Chg: -1.10 (2.11%)Bullish Signal Reversed on 11Ma,2011 box reversal chart

Prelim. Bearish Price Obj. (Rev.): 40.0

StockChans. com

higher highs

lowsSignalReversed

lows

The next chart shows 1. Rowe Price (TROW) with a pair of Bullish Signal Reversed patterns. The first formed with !'MJ higher highs and then a Double Bottom Breakdown. The second formed with three higher highs and a Double Bottom Breakdown. Notice that the second pattern traced out higher highs that were significantly higher than the prior highs. Higher highs do not have to be uniform or marginally (1-box) higher. The pattern simply requires a series of higher highs and higher lows that are reversed with a Double Bottom Breakdown.

T. Rowe Price Associates,lnc. (TROW) P&F PatternTraditional,3

Nasdaq Global Select Mkt.

16Mar2011. 16:00 ET. daily. 0: 61.94. H: 62.66, L: 60.58, C: 60.83, V: 2154791. Chg: 1.13 (-1.82%)Bullish Signal Reversed on 10Mar2011 box reversal chart

Prelim. Bearish Price Obj. (Rev.): 51.0

StockChans. com

Signal Reversed

higher highs higher lows

Reversals and ContinuationsThe reversal versus conn nuation aspect depends on the direction of the prior move and relative price levels. A Bullish Signal Reversed pattern that forms just after a new high would clearly be a reversal pattern. The chart below shows Haliburton (HAL) vvith a breakout at 35 and then a series of higher highs extending to 48. With a new high forming just before the Double Bottom Breakdown, this would be considered a reversal pattern.

Halliburton

Co. (HAL)8ullish

NYS E L: 42.52. C: 42.94. 11-Mar-2011

15Mar. 16:0.0. ET. daily. 0: 44.18. H: 44.43.

(rever.s~81 )higher highs higher lows

PM PatternTraditional,3.

Si9.F'lal R.eversed

i'llM

box reversal ;l'Iart

Prelim. Bearish Price Obj. (R.ev..):3.7.0.

StockCtl8,ns.com

Bullish Signal Reversed

A Bullish Signal Reversed pattern that retraces a portion of the prior decline or forms as a bounce within a bigger downtrend can be considered a continuation pattern. In bar chart terms, such patterns would be similar to rising wedges or flags. The chart below shows Dreamworks (DWA) with a continuation Bullish Signal Reversed pattern triggering in March 2011. The stock declined sharply from its prior high, retraced part of this decline with higher highs and then signaled the continuation lower with a Double Bottom Breakdown.

DreamWorks Animation SKGInc. (OWA)

Nesdaq Global Select Mid. Chg: 0.26 (0.980.4)

16fII1ar2011. 16:00 ET. daily. 0: 26.43. H: 26.68. L: 26.18. C: 26.19. V: 1037172.

P&F Patter.l

Bullish Signal Reversed on 13Dec2010

Traditional. 3 box reversal chart Prelim. Bearish Price Obj. (Rev.): 14.0

StockChans.com

(continuation) higher highs higher lows

higher highs higher lows

Bullish Signal Reversed

Bearish Signal ReversedA Bearish Signal Reversed pattern starts with a series of lower lows and lower highs. A lower low forms when an O-Column moves below the low of the prior O-Column. A lower high forms when an X-Column fails to exceed the high of the prior X-Column. This combination of lower lows and lower highs forms a downtrend, which is the "bearish signal". It takes at least two successive lower lows to have a working downtrend. The first 0Column sets the initial low and the two subsequent O-Columns forge successive lower lows. Each O-Column is followed by an X-Column. The second X-Column forms a lower high by failing to exceed the high of the first X-Column. The "reversed" signal occurs when the most recent X-Column breaks above the high of the prior X-Column. The bearish signal (downtrend) has been reversed with a Double Top Breakout The chart below shows Atheros (A1HR) with a pair of Bearish Signal Reversed patterns. The stock traced out two lower lows in the first pattern and reversed this decline with a Double Top Breakout. The second pattern formed withtwo lower lows and a Double Top Breakout It may be possible to extend this pattern all the way back to the 2010 high at 43 (black arrow). Price action to the left of the green box was not included because it was part of a Triple Bottom Breakdown (blue line). Such judgment calls are the reason technical analysis is part art and part science.

Atheros Communications,

Inc. (ATHR)

Nasdaq Global Select Mirt.

17Mar2011. 11:24 ET. daily. 0: 44.68, H:44.68, L: 44.63, C: 44.65, V: 619833. Chg: +O.04(O.09~)

P&F PatternTraditional,3

Bearish Signal Reversed on Q4Nov-2010 box reversal chart

Prelim. Bullish Price Obj. (Rev.): 87.0

StockChans. com

Bearish Signal

Reversed

lower lows lower

lower lows lowerThe next chart shows Big Lots (BI G) with a Bearish Signal Reversed pattern that failed to hold. The first signal reversed the lower lows with a breakout, but breakout failed to hold and the stock moved sharply lower with a long O-Column. Not all signals work. The second pattern formed with three lower lows and then a Double Top Breakout on the most recent X-Column (far right).

BigLots, Inc.(BIG) NYSE17rv1af2011. 11 :30 ET. daily. 0: 42.67. H: 42.67. L: 41.85, C: 42.06, V: 910647. Chg: 0.28 (-0.66%)

P&F PatterllTraditional,

Bearish Signal Reversed on 07F'eb2011


Prettm. Bullish Price Obj. (Rev.): 74.0

stcckcnarts.com

Bearish Signal Reversed

lower lows lower highs


Reversals and ContinuationsThe reversal versus conti nuation aspect depends on the direction of the prior move and relative price levels. A Bearish Signal Reversed pattern that forms just after a new low would clearly be a reversal pattern. The chart below shows Websense (WBSN) hitting a new low in early 2009. This low was part of a Bearish Signal Reversed pattern because the stock forged a Double Top Breakout just after this new low. The second pattern is a bullish continuation pattern because it formed as a correction after a new high. Notice how the stock forged a multi-year high in April 2010 (red 4).

Websense, Inc. (WBSN) P&F Patter.)

Nesdeq Global Select 1v1kt. Chg: 0.38 (1.66%)

171111.112011.11:22 ET. daily. 0: 22.95. H: 22.96. L: 22.38. C: 22.47. V: 262723. High Pole Warning on 17Mar2011 Traditional. 3 box reversal chart Bullish Price Obj. (Rev.): 31.5

StockChans. com

Bearish Signal Reversed lower lows lower highs


A Bearish Signal Reversed pattern that retraces a portion of the prior decline or forms as a correction within a bigger uptrend can be considered a continuation pattern. In bar chart terms, such patterns would be similar to falling wedges or flags. The chart below shows Avnet (AV1) with tw:> continuation Bearish Signal Reversed patterns. The first formed a low well above the 2008 low and reversed with a Double Top Breakout After a big advance above 30, the stock corrected again with a Bearish Signal Reversed pattern in 2010. This pattern was reversed later in the year with a Double Top Breakout in October 2010 (red A).

Alllle!, Inc. (AVT) NYSE171II1al2011. 11:19 ET. daily. 0: 32.63, H: 32.75, L: 32.19, C: 32.65, V: 218899, Chg: +0.77 (2.42%)No New P&F' P attern Traditional. 3 box reversal chart


StockChans.com

Bearish Signal Reversed



Objectives and RiskChartists can use the Horizontal Count Method or the Vertical Count Method to establish Price Objectives. These are detailed in separate ChartSchool articles. Price Objectives are not hard targets. Instead, they simply provide a guesstimate for an upside or downside objective. Chartists should also study the chart to assess risk. For example, a move below support or the pattern low would clearly negate a breakout. The box just below the pattern low often marks the worst-case level for a pattern failure. Similarly, a Double Bottom Breakdown or a contradictory P&F pattern would argue for a reassessment. There are sometimes failure clues before price hits the worst-case level. Chartists should also employ other technical analysis techniques to measure risk and monitor the unfolding trend.

ConclusionsEven though Bullish and Bearish Signal Reversed patterns can mark reversals or continuations, they are probably best used as continuation patterns. A pullback after a long X-Column would form a classic Bullish Signal Reversed setup, while a correction after a long O-Column would form a classic Bearish Signal Reversed setup. These are more powerful because they signal a resumption of the bigger trend.


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Further Study

StockCharts.com

- ChartSchool

Learn more about Technical Analysis and Charting Terminology

You are here: StockCharts.com Page P&F Catapults

ChartSchool Chart Analysis Point & Figure Horne

P&F CatapultsIntroductionP&F Catapults form with two consecutive P&F signals in the same direction. A typical Bullish Catapult forms with a Triple Top Breakout, a pullback and then a Double Top Breakout. The ability to continue higher after the pullback shows underlying strength. A typical Bearish Catapult forms with a Triple Bottom Breakdown, a bounce and then a Double Bottom Breakdown. Selling pressure reasserts itself after a weak bounce to affirm the prior bearish signal.

Bullish CatapultA Bullish Catapult forms with an initial breakout, a short pullback and a second breakout. While the ideal Bullish Catapult starts with a Triple Top Breakout, Quadruple Top Breakouts or Multiple Top Breakouts are also possible. After the initial Triple Top Breakout, prices reverse and move back into the pattern. The initial breakout or resistance break is usually just 1-3 boxes. Prices move high enough to break resistance and there is not much upside after the initial breakout. A 3-box reversal then forms and a new O-Column declines back into the Triple Top pattern. This is just a pullback because the O-Column does not break below the low of the pattern or forge a Double Bottom Breakdown. Prices then turn back up with a new X-Column that exceeds the prior X-Column to complete the catapult (Double Top Breakout). The pullback into the pattern represents indecision among the bulls. The ability to overcome this indecision with another breakout shows renewed strength.

Williams Sonoma,lnc.

(WSM)

NYSE

21Maf2011, 16:00 ET. daily. 0: 38.77. H: 39.35. L: 38.49, C: 38.74. V: 1453772. Chg: +0.71 (1.87")

P&F Patter'lTraditional,

Bullish Catapult Breakout on 15lvlar2011

rT.:r::i::-'i'='


Bullish Price Obj. (Rev.): 59,0

Top Breakout Double Top Breakout

+

Multiple TOil Breakout + Double Top Breakout

The chart above shows Williams Sonoma (WSM) with three Bullish Catapults. As with most P&F patterns, catapults can form as reversal or continuation patterns. It simply depends on the prior trend. The first Bullish Catapult reversed the downtrend with a Spread Triple Top Breakout in February 2009 and a Double Top Breakout in March. Notice that the breakout was t-box and the pullback held above the low of the prior0Column. The second Bullish Catapult occurred with a Multiple Top Breakout, a fourbox pullback and a subsequent Double Top Breakout. The third is a classic Bullish Catapult within an uptrend, which makes it a continuation pattern.

Bearish CatapultA Bearish Catapult forms with an initial breakdown, a short bounce and a second breakdown. While the ideal Bearish Catapult starts with a Triple Bottom Breakdown, Quadruple Bottom Breakdowns or Multiple Bottom Breakdowns are also possible.

After the initial Triple Bottom Breakdown, prices reverse and move back into the pattern. The initial breakdown or support break is usually just 1-3 boxes. Prices move low enough to break support and there is not much downside after the initial breakdown. A 3-box reversal then forms and a new X-Column advances back into the Triple Bottom pattern. This is a weak bounce because the X-Column does not break below the high of the pattern or forge a Double Bottom Breakout. Prices then turn back down with a new O-Column that exceeds the prior O-Column to complete the catapult (Double Bottom Breakdown). The bounce back into the pattern shows the bulls giving it one more go. However, the bounce is weak and the second breakdown puts the bears in full control.FedEx corp. (FDX)NYSE Chg: +0.58 (0.65%)

21llI1af2011. 16:00 ET. daily. 0: 90.37. H: 90.48, L: 89.61. C: 89.86. V: 2140560.

P&F Pattertl Beat Frap on 17r~lal2011Tladitional.3 box reverser chart Bearish Price Obj. (Rev.): 80.0

StockCharts.com

Triple Bottom Breakdown + Double Bottom Breakdown

The chart above shows FedEx (FOX) with a Bearish Catapult consisting of a Triple Top Breakdown and a Double Bottom Breakdown. Because the pattern includes the high at 97, it would be considered a reversal pattern. Notice that the bounce carried all the way to the prior high (X-Column), but did not exceed it to negate the pattern.

Unum Group (UNMI P&F PattertlTraditional,

NYSE

21Maf2011. 16:00 ET. daily. 0: 26.03, H: 26.34. L: 25.91. c. 26.25. V: 1727287. Chg: +0.58 (2.26%)Triple Top Breakout on 06Jan2011 3 box reversal chart

Prelim. Bullish Price Obj. (Rev.): 42.5

stockcnens.com

Triple Bottom Breakdown + Double Bottom Breakdown

The chart above shows Unum Group (UNM) with a classic Bearish Catapult. This would be considered a bearish continuation pattern because the breakdowns occurred after a couple of Double Bottom Breakdowns and the high formed just before this pattern.

Objectives and RiskThe Horizontal Count Method is the preferred method for these patterns. In short, the width of the pattern is multiplied by the box size and reversal amount to form an estimated extension. This is added to the low of a Bullish Catapult or the subtracted from the high of a Bearish Catapult for a Price Objective. Details and examples can be found the ChartSchool. Price Objectives are not hard targets. Instead, they simply provide a guesstimate for an upside or downside objective. Chartists should also study the chart to assess risk. For example, a move below support or the pattern low would clearly negate a breakout. The box just below the pattern low often marks the worst-case level for a pattern failure. Si milarly, a Double Bottom Breakdown or a contradictory P&F pattern would argue for a reassessment. There are sometimes failure clues before price hits the worst-case level. Chartists should also employ other technical analysis techniques to measure risk and monitor the unfolding trend.

ConclusionsBullish and Bearish Catapults are at least seven columns wide. which makes them above average in width for P&F patterns. Width is an important aspect of the pattern. Wider patterns indicate a longer congestion phase that makes the subsequent breakout or breakdown all the more important. It is sometimes possible to anticipate a catapult pattern with the 3-box reversal that forms the last column. This would be the seventh column for a classic catapult. The chart below shows FedEx with a possible Bearish Catapult unfolding. After a Triple Top Breakdown, the stock bounced back into the pattern with a 4-box X-Column. The next 3-box reversal down (O-Column) could be used to anticipate further weakness below the prior O-Column. It would take a 5-box O-Column to forge a Double Bottom Breakdown and complete the Bearish Catapult pattern (red dols).FedEx Corp. (FDX)21M;u2011, NYSE Chg: +0.58 (0.65%)

16:00 ET. daily. 0: 90.37. H: 90.48, L: 89.61. C: 89.86, V: 2140560. Beal Frap on 17llIlal2011 box reversal chart

P&F Patterl)Tladitional,3


stockcnerts.com

Bottom BreakDown

Creating P&F ChartsStockcharts.com offers three different Point & Figure charting styles: Graphical, Text and Dynamic. Graphic charls were used in the examples above. Trendlines and other indicators can be found in the Chart Overlays section just below each P&F chart. ~ P&F Charts are classic old-school style with plus signs (+) marking the 45 degree trendlines. Dynamic P&F Charts allow chartisls to dynamically adjust the box size, the reversal amount and draw their own trendlines. Links to the other styles can be found

just above each P&F chart. Links to articles on P&F Alerts and Price Objectives can be found below each P&F chart. Click here for a live P&F chart.

Enter TIcker: Spy or choose froLm:-:----' ( Update Chart ) S&P 500 SPDRs (SPY)NYSE

I

231111.11,16:00ET. daily. 0: 128.93. H: 130.00, L: 128.32. C: 129.66. V: 148.41\11.Chg: +0.37 No New P&F P attem Tladitional,3 box reversal chart


StockChans.com

CEhnstructions Q

P&E ScansP&F Pattern Alerts can be found at end of the Predefined Scans Page. StockCharts.com provides daily alerts for more than 15 P&F patterns on various exchanges, including the TSX and LSE. Some of these are shown in the image below. Note that there were over 100 NYSE stocks with Triple Top Breakouts.


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Further Study

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Learn more about Technical Analysis and Charting Terminology

You are here: StockCharts.com Page P&F Triangles

ChartSchool Chart Analysis Point & Figure Horne

P&F TrianglesIntroductionTriangles form as prices contract on a P&F chart. The X-Columns (up) form successive lower highs as the O-Columns (down) form successive higher lows. The inability of prices to break from this contracting range reflects a standoff between buying pressure and selling pressure. This standoff is resolved with the next P&F signal. A Double Top Breakout makes the triangle bullish, while a Double Bottom Breakdown makes the triangle bearish.

Triangle WidthTriangles have at least five columns. The first four columns form the triangle and the fifth column marks the breakout or breakdown. There are at least two X-Columns with the second column forming a lower high. There are at least two O-Columns with the second column forming a higher low. Triangles can extend more than four columns as long as subsequent X-Columns continue forming lower highs and subsequent 0Columns form a higher low. Triangles are neutral patterns dependent on the breakout or breakdown for the signal.

Triangle BreakoutA Double Top Breakout signals a bullish resolution to the triangle pattern. Note that a trendline break is not enough. A basic P&F buy signal, such as a Double Top Breakout, is required to complete the triangle and trigger the bullish signal.

Chesapeake Energy Corp. (CHK)

NYSE Chg: +0.08 (0.24%)

221II1af2011, 11 :29 ET, daily, 0: 33.89, H: 34.00, L: 33.55, C: 33.83, V: 3197707, No New P&F' Pattern Traditional. 3 box reversal chart


stockcnens.com

The chart above shows Chesapeake Energy (CHK) IMth a triangle forming in 2010. The blue lines ouUine the triangle. Note that these lines do not appear on the chart. They were simply added to make the pattern more visible. There weretwo O-Columns IMth higher loINS and one X-Column with a lower high. This pattern turned bullish with the Double Top Breakout at 25.

ProShares Uhra QQQ Fund (QLD)

NYSE

22llI1al2011. 11 :39 ET. daily. 0: 84.30, H: 84.42. L: 83.56, C: 83.81. V: 1394370. No New P&F' Pattem Traditional. 3 box reversal chart Bearish Price Obj. (Rev.): 65.0

Chg: 0.19 (0.23%)

stockcnens.com

The chart above shows the ProShares Ultra QQQQ Fund (OLD) with a triangle forming after a sharp advance towards the end of 2010. This triangle represented a consolidation within an uptrend. Even though such consolidations are typically continuation patterns, they are still dependent on a breakout before turning bullish. After a lower high and higher low, the ETF forged a Double Top Breakout to confirm a Bullish Triangle.

Triangle BreakdownA Double Bottom Breakdown signals a bearish resolution to the triangle pattern. Note that a trendline break is not enough. A basic P&F sell signal, such as a Double Bottom Breakdown, is required to complete the triangle and trigger the bearish signal. The chart below shows Anas Air (AWWW) with a long X-Column and then a triangle.

While this pattern might be viewed as a potentially bullish continuation pattern, the triangle depends on a break for confirmation. After two lower highs and a higher low, the triangle broke to the downside with a Double Bottom Breakdown.Atlas Air Worlwide Hldgs (AAWW)Nesdeq Global S.I ec t Mkt.

221111.112011.11:27 ET, daily. 0: 67.15, H: 67.44. L: 66.02. C: 66.20, V: 72002. Chg: 0.88 (-1.31.4) P&F Patterll Low Pole Reversal on 181111.112011Traditional, 3 box reversal chart Bearish Price Obj. (Rev.): 54.0

StockChans. com

The chart below shows F5 Networks (FFIV) with a long O-Column that forged a Triple Top Breakdown. A consolidation formed after this long column and a triangle evolved. After a higher low and lower high, the stock continued lower with a Double Bottom Breakdown to turn the triangle bearish.

F5 Networks, Inc. (FFIV)P&F PatteruTfaditional,3

Nesdeq Global Select

Mkt.

22flll.u. 10:48 ET. daily. 0: 95.17. H: 96.60, L: 93.83, C: 93.98. V: 2.5M. Chg: 1.62Triple Bottom Breakdown on 171\11.112011 box reverser chart


StockCharts. com

Objectives and RiskChartists can use the Horizontal Count Method or the Vertical Count Method to establish Price Objectives. These are detailed in separate ChartSchool articles (click here). Price OOjectives are not hard targets. Instead, they simply provide a guesstimate for an upside or downside objective. Chartists should also study the chart to assess risk. After an upside breakout, a move below the low of the last O-Column would produce a Double Bottom Breakdown and invalidate a triangle breakout. Chartists should also employ other technical analysis techniques to measure risk and monitor the unfolding trend.


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