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1989issue C081-5

Two-scale point-and-figure trendlines and stop placement

A case study starts on a longer-horizon one-by-three point-and-figure chart, then checks a one-by-one chart so congestion and breaks can be read at two scales. While a downtrend line still holds, short-horizon upside patterns are treated as overly optimistic. A horizontal count states the objective, and a stop-loss just below the base is what kills the idea if that base fails.

  • The case study begins on a longer-horizon one-by-three chart and then checks a one-by-one chart covering a slightly different window so congestion and breaks can be read at two scales.
  • While a downtrend line drawn across successive column tops still holds, short-horizon patterns that look upward are treated as overly optimistic rather than as decisive reversals.
  • A horizontal count of filled and empty boxes on one price line states the projected advance or decline, and a stop-loss is first placed just below the base of the triggering congestion zone.
  • When neither chart scale has produced an uptrend line, the setup is treated as marginal and no commitment is made. A later count from higher congestion refreshes the objective instead of treating the first count as permanent.
Entries in this reading3 entries
Current trackPoint and figure chart37 readingsTrendline128 readingsStop-loss order144 readings

Two chart scales, one sequence

The case study begins on a longer-horizon one-by-three chart and then checks a one-by-one chart covering a slightly different window so congestion and breaks can be read at two scales.

Point-and-figure is a box-and-column chart of directional price movement, read here at two reversal scales so congestion width can be turned into a countable objective. The coarser one-by-three chart is used first, and longer-horizon trendlines and channels are drawn on it. The finer one-by-one chart is used to time congestion breaks and to take the horizontal count that proposes a target.

The coarse trendline and short-horizon patterns

A trendline is a line across successive column tops or bottoms that classifies whether shorter-horizon patterns are working with or against the prevailing map.

While a downtrend line drawn across successive column tops still holds, short-horizon patterns that look upward are treated as overly optimistic rather than as decisive reversals.

When neither chart scale has produced an uptrend line, the setup is treated as marginal and no commitment is made.

The congestion zone and the horizontal count

A congestion zone is a sideways cluster of columns whose width supplies the count and whose break supplies the trigger for the projected move.

A projected move is taken from a horizontal count. The number of X and O boxes on one price line, including empty boxes between letters, is read as the number of points of advance from the deepest low or decline from the peak high.

A channel that reinforces the uptrend

A line drawn parallel to an uptrend so that it also tags successive column tops is read as a channel that reinforces the uptrend line.

Editorial note: a channel is a pair of parallel trendlines that tag both column bottoms and tops. It is read as reinforcement of the trendline, not as a separate signal.

Stop-loss under the base

A stop-loss is first placed just below the base of the triggering congestion zone. After price overshoots the counted objective and no new pattern stop is available, the stop is raised using a half-retracement of the completed run as a rule of thumb.

The stop-loss is a pre-committed exit just beyond a structural invalidation level, later raised when structure or a half-retracement rule of thumb supplies a tighter bound.

A downtrend break is not a reversal by itself

A downtrend break followed by sideways action and a later downward thrust is used to show that rupturing a downtrend line is not, by itself, a reversal of direction.

When an inverse fulcrum is accepted

An inverse fulcrum is identified only after an objective has been met, a congestion forms with a mid-area downward thrust, a steep uptrend breaks, and later action prints below that mid-area thrust. A new horizontal count then supplies a downside objective.

A later count refreshes the objective

After a later uptrend and stop-loss are defined on the one-by-one chart, a new horizontal count is taken from the higher congestion to refresh the upside objective rather than treating the first count as permanent.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
4 of 30 in the Point and figure chart track
19891-6 pp.Next on Point and figure chartAdjusted net asset value, tighter reversals, and written stops on a fund point-and-figure chartMutual-fund net asset value is reduced when distributions are paid, so unadjusted prices break continuity on a point-and-figure grid. The working adjustment adds each distribution back on the ex-dividend date before the plot is built.
All readings on this track · 30 readings
  1. 1988Constructing trend definitions with filters and lines
  2. 1989Reversal count as the clock on point-and-figure charts
  3. 1989Point-and-figure setup and session-average entry windows
  4. 1989Two-scale point-and-figure trendlines and stop placement
  5. 1989Adjusted net asset value, tighter reversals, and written stops on a fund point-and-figure chart
  6. 1990Stack option odds after point-and-figure signals
  7. 1991Constructing a point-and-figure downtrend-break
  8. 1991Constructing point-and-figure box and reversal charts
  9. 1991Constructing a close-tested one-two ladder on a point-and-figure chart
  10. 1992Point-and-figure, breadth, and volume as falsifiable hypotheses
  11. 1992Three-gate stock selection with ranks and point and figure
  12. 1993Constructing combined stochastics and point-and-figure relative strength
  13. 1997Point-and-figure box scale and reversal construction
  14. 2000Cotton weekly point-and-figure: late-stage decline, named weekly close
  15. 2000Constructing point-and-figure charts for support, resistance, and breakouts
  16. 2001Swiss franc: seasonal permission and a weekly point-and-figure breakout
  17. 2001Constructing point-and-figure boxes and reversals
  18. 2002Point-and-figure construction: box, live column, and three-box reversal
  19. 2003E-mini point-and-figure box-size and a descending-triangle breakout
  20. 2003A reconstruction critique of point-and-figure daytrading
  21. 2004Point-and-figure column moving-average crossovers
  22. 2005Box-series transforms for trend and channel work
  23. 2006Constructing bearish point-and-figure support breaks
  24. 2008Point-and-figure forex breakouts and triangles
  25. 2012From tactile charts to written trade rules
  26. 2013Combine a Point and figure chart and Moving-average crossover inside one System optimization procedure
  27. 2015Point-and-figure time and volume limits are conventions to test
  28. 2016Measurement-first critique of indicator defaults
  29. 2017Point-and-figure construction, reversals, and column-based overlays
  30. 2019A 2019 charting case as a three-check trend classroom
By fieldChart patterns222 readingsBy year198983 readings
All 37 readings tagged Point and figure chart
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1989Adjusted net asset value, tighter reversals, and written stops on a fund point-and-figure chart1988Constructing trend definitions with filters and lines1989Point-and-figure fulcrum, count, and flag as three jobs1989Reversal count as the clock on point-and-figure charts2000Cotton weekly point-and-figure: late-stage decline, named weekly close