Point & Figure charts display price activity by plotting a column of X's on the chart at each price traded until a specified reversal amount occurs. At the reversal price, the Point & Figure chart shifts to the left and begins plotting a column of O's on the chart at each price traded until a specified reversal amount occurs. The process of alternately plotting X's and O's continues until the reversal amount is reached in each direction. The resulting formation of X and O columns can be analyzed to determine market strength and weakness. For additional information: See Point & Figure charts in CQGSTUDY.HLP.
The Point and Figure (PF) charting method is a technique has been used for many years in analyzing the variations in prices of stocks and commodities. There are several types of PF charting methods. Some employ trend lines, resistance levels, and various other additions to the chart. In this study, we shall be concerned with only daily reversal type charts. The principal advantage of a PF chart is that it is much easier to read and interpret than other types of charts. All the small, and often confusing, price movements are eliminated, and only the most important features of the price action remain. It would be reasonable to think of this method as a filter that (hopefully) allows only meaningful information to enter the chart. Two basic symbols are used: X denotes the continuance of an increase in price and is always "stacked" in the vertical direction; O denotes the continuance of a decrease in price and is always "stacked" in the vertical direction. While prices are rising Xs are used. When falling, Os are used.