Point-and-figure fulcrum, count, and flag as three jobs

Three jobs on one tape

A point-and-figure chart records filtered price change as X and O columns instead of plotting every print against the clock. Box-size is the price increment that must print before another X or O is marked on the vertical scale. Reversal is the number of boxes required to start a new column in the opposite direction.

This case study follows one tape through a congestion-area, a fulcrum with a horizontal-count, collateral trendlines, and brief flags. An editorial reading is that those pieces do three different jobs. Width becomes a countable objective. Diagonal breaks become confirmation or warning. Brief flags become only invalidation checkpoints, so the pattern is a sequence of tests rather than a single picture.

Congestion as a range and a width

After a sizable rise or fall, point-and-figure congestion is treated as sideways activity inside a trading range. A rule of thumb of about 15 percent of price is used for a low-priced stock, 10 percent for a medium-priced stock, and 5 percent for a high-priced stock.

Congestion is ordinarily studied on a one-point box, one-box reversal chart. A half-point, one-box reversal chart is presented as possibly more useful when the stock is below 20.

How strongly a congestion-area later acts as support or resistance is said to depend in part on its width. More than five or six columns is offered as a general congestion threshold. In the worked example, a 13-column zone is judged substantial for that issue.

How the sideways phase ends

A congestion-area is described as continuing until an upside or downside breakout. Heavier activity at the bottom of the range is read as a hint of an upside break. Heavier activity at the top is read as a hint of a downside break.

Trendline as confirmation or warning

One trendline method connects successive X-column tops or O-column bottoms and treats at least three touches as establishing a usable line. A contrasting method draws a 45-degree line from the extreme high or low. Longer lines are treated as stronger.

Using a trendline without other chart evidence is flagged as a whipsaw risk: a false break that reverses quickly. An editorial reading is that the diagonal is collateral. It can confirm or warn. It is not the structure that sizes the next swing.

Recognizing a fulcrum

A fulcrum is recognized by a thrust to a new extreme, activity near that extreme, a later counter-move of about 15 percent, repeated tests of the extreme, and a subsequent thrust that goes at least one point beyond the counter-move extreme. The walls of that congestion structure are what make the next swing countable.

Horizontal-count from the common base

A fulcrum objective is formed by a horizontal-count. Columns between the left and right walls are counted at their common base, and that count is added to the base price. In the first example the walls run from column 14 to column 27, the common base is 29, the count is 14, and the stated objective is 43.

Flags as invalidation stations

After the first advance, brief flag pauses of a few columns are used as stations to raise invalidation a stated two points beneath the flag. In this case study the flag-and-pennant pause is used to raise invalidation, not to issue a standalone forecast.

The same passage cautions that the projection method should not be expected to be highly accurate even when price later approaches the counted objective.

A second count in the same advance

A later mid-trend fulcrum is counted 16 columns across the 39 line from column 30 to column 45, producing a second objective of 55. An uptrend line that gains a third touch at column 51 is treated as collateral confirmation. Invalidation is still placed just under the latest flag rather than on that line.

An editorial reading is that the second count updates the objective while the flag, not the trendline, remains the place the hypothesis fails.

When the line meets later congestion

When the established uptrend line later touches a new congestion zone around column 70, a breakout from that zone in either direction is expected. A downward completion of an inverse fulcrum is treated as a decline setup. The earlier wide congestion between columns 30 and 45 is expected to act as support on the way down.