STOCK GOODIES PLAYS OF THE WEEK

[Black_NITE]

P&F Congestion

Some sort of congestion pattern or reversal must form before chartists can consider the horizontal count. Some Point & Figure patterns qualify as congestion patterns. These include Triple Top Breakouts and Triple Bottom Breakdowns, Spread Triple Top Breakouts and Spread Triple Bottom Breakdowns as well as Quadruple Top Breakouts and Quadruple Bottom Breakdowns. These classic P&F patterns clearly mark a congestion period that ends with a subsequent support or resistance break. The chart below shows JP Morgan with a Quadruple Top Breakout in the upper right hand corner. This Quadruple Top marked a congestion pattern as prices moved sideways from June (red 6) to December (red C). Notice that three reaction highs established a clear resistance level that was broke with the current column of X's. Some other classic congestions and breaks are shown as well.



The chart below shows Equinix (EQIX) with a pair of Spread Triple Bottom Breakdowns. This is just a Triple Bottom with a couple extra columns that spread the pattern a little wider. On the right hand side, the red box marks the congestion pattern. Notice how the stock moved to the 93 box and then traded sideways in January-February (red 2). One month ends and the other starts with the red numbers. For example, January ends and February starts at the red number 2. EQIX broke Spread Triple Bottom support with a move below the prior two columns of O's.



As noted above, the congestion formation does not have to be a specific P&F pattern. There needs to be a definable congestion pattern that is at least five columns wide and a column that breaks this congestion. A clear support or resistance level should also be visible. The congestion ends when a column breaks above resistance or below support. Once broken, the width of the congestion is fixed and chartists can start the counting process.