AI
Saturday, February 02, 2008 10:01:39 PM
Hello Foot!
The 6% reversal has to do with the point and figure method of plotting the indicator. If you plot it using the PnF method with a box size of 2, you need a 3 box reversal to change columns, hence the 6% reversal.
I like looking at the indicator using a line chart because you can find patterns that won't show up in a PnF chart. Notice the box on the left, last Aug's low. Deep V shape, with a pull back of less than 6%. Lets you know, the reversal is real. Look at the red box on the right. This is the rally right before Christmas. The BP had already reversed down by 6%, but the rally failed to get the BP to reverse back up by 6%. Let you know the rally was not for real, and we should head back down. Same thing now. We have had a deep V reversal on the BP and we are expecting a pull back. If the BP does not reverse by 6%, then we have just that much more confidence in the rally.
If you just look at the PnF chart of the BP, look at the most recent column. If it is in X's, you should be on 'offense'; if in O's, you should be on 'defense'. Also, use the 30/70 levels as oversold/overbought levels. Tom Dorsey (Point and Figure Charting) uses the BPNYA as their primary market indicator. While it may lag a bit (as with most indicators), it does help me to define my market bias. Right now it is bullish.
Good luck!
The 6% reversal has to do with the point and figure method of plotting the indicator. If you plot it using the PnF method with a box size of 2, you need a 3 box reversal to change columns, hence the 6% reversal.
I like looking at the indicator using a line chart because you can find patterns that won't show up in a PnF chart. Notice the box on the left, last Aug's low. Deep V shape, with a pull back of less than 6%. Lets you know, the reversal is real. Look at the red box on the right. This is the rally right before Christmas. The BP had already reversed down by 6%, but the rally failed to get the BP to reverse back up by 6%. Let you know the rally was not for real, and we should head back down. Same thing now. We have had a deep V reversal on the BP and we are expecting a pull back. If the BP does not reverse by 6%, then we have just that much more confidence in the rally.
If you just look at the PnF chart of the BP, look at the most recent column. If it is in X's, you should be on 'offense'; if in O's, you should be on 'defense'. Also, use the 30/70 levels as oversold/overbought levels. Tom Dorsey (Point and Figure Charting) uses the BPNYA as their primary market indicator. While it may lag a bit (as with most indicators), it does help me to define my market bias. Right now it is bullish.
Good luck!
Jared
jjames10@nc.rr.com
"Don't Panic!"
