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1989issue C031-7

Reversal count as the clock on point-and-figure charts

A point-and-figure chart has no time scale on the horizontal axis. A new column is added only after a qualifying price reversal. This archive article sets the same tape on a one-box chart and a three-box reversal, then follows congestion, a drawn trendline, and a later breakout as one sequence.

  • A point-and-figure chart adds a new column only after a qualifying reversal, so a stretch of calendar time that never warrants a mark leaves the chart blank.
  • Sensitivity is set by vertical point size and box-reversal count: a one-box chart opens a new column after a one-box contrary move, while a three-box reversal still plots each one-point print but needs three boxes to shift columns.
  • Three-box reversal charts are presented as the clearer surface for long- or intermediate-term trendlines; one-box charts keep more short-term detail for finer pattern work.
  • A congestion zone, a trendline across successive lower highs or higher lows, and a later breakout are read as one sequence, and the construction is described as rarely producing a rapid flip-flop of opposing signals.
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How columns replace the calendar

A point-and-figure chart has no time scale on the horizontal axis. A new column is added only after a qualifying price reversal.

Rising prices are marked with X and falling prices with O. The first print of a month uses a month code, with October, November, and December often written as A, B, and C.

If price never moves enough to warrant a mark, that stretch of calendar time leaves the chart blank, so some months never appear.

Point size and box-reversal

Sensitivity is set by vertical point size and reversal box count. A 1×1 chart opens a new column after a one-box reversal, while a 1×3 chart still plots each one-point print but needs a three-box reversal to shift columns.

On the illustrated stock near 30, a 1×1 construction treated about a 3 percent move as a mark, whereas a 1×3 construction needed about a 10 percent reversal to change columns and compressed nearly eight years into a short panel.

Three-box reversal charts are presented as the clearer surface for long- or intermediate-term trendlines. One-box charts keep more short-term detail for finer pattern work.

Trendlines, triangles, and breakout

A downtrend line joins tops of columns of successively lower highs. An uptrend line joins bottoms of successively higher lows. When those lines converge into a triangle, the later directional break is treated as the next-path clue.

A breakout is a print that leaves a congestion zone or crosses a drawn trendline and thereby makes the next-path hypothesis testable.

Two case studies of congestion and breakout

In the first case study, a congestion zone between 23 and 26 to 27 was followed by a June 1987 rise through 28, read as a breakout above the band. Later 1988 lower highs and a print through the band floor to 25 were read as a downward break.

In the second case study, an upside breakout from a 23 to 26 congestion zone at 27 carried a width-based objective of 33. A descending trendline of 1987 lower peaks was treated as a lid until it was broken in April 1988.

A flag, a brief pause after an advance, is used in the cases to locate a protective exit level. The construction is described as rarely producing a rapid flip-flop of opposing signals.

American Telephone 1×1: named prints from the 1987 break to the 1988 low

A trader is meant to see one falsifiable sequence on the one-box tape: American Telephone leaves the 26–27 congestion at 28 in June 1987, runs to 35, flags at 34–33, stops at 32, rebuilds a 26–30 shelf, then breaks to 25 in August 1988. Every point is a dollar price Charles Idol states in the article, plotted in the order he gives them, because the source grid has no calendar axis.
A trader is meant to see one falsifiable sequence on the one-box tape: American Telephone leaves the 26–27 congestion at 28 in June 1987, runs to 35, flags at 34–33, stops at 32, rebuilds a 26–30 shelf, then breaks to 25 in August 1988. Every point is a dollar price Charles Idol states in the article, plotted in the order he gives them, because the source grid has no calendar axis.American Telephone · 1×1 point-and-figure · 1987-01-01T00:00:00.000Z to 1988-08-31T00:00:00.000Z

Box size is one dollar with a one-box reversal, about 3 percent on this $30 stock. Horizontal order is the sequence of prices named in the text, not elapsed time and not a column-by-column read of the X-O grid.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
2 of 30 in the Point and figure chart track
19891-9 pp.Next on Point and figure chartPoint-and-figure setup and session-average entry windowsSpecify a commodity entry as a multi-week setup plus a same-session signal, and require those two functions to come from different analytical forms.
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 fieldTrend and channels181 readingsBy year198983 readings
All 37 readings tagged Point and figure chart
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