Buy and Sell Chart Partterns

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Buy and Sell Chart Partterns

The Basic Chart Patterns
Point and Figure charting is unique in that it plots price against changes in
direction by plotting a column of Xs as the price rises and a column of Os
as the price falls. This method of recording price changes causes
recurring patterns of Xs and Os in p&f charts. These patterns range from
very simple to very complex patterns.
The most basic of all patterns are the Simple Buy and Simple Sell, also
called the Double Top and Double Bottom patterns. The Simple Buy
pattern, as shown in the figure below, occurs when the current X column
rises one box higher than the top X in the prior column of Xs. The simple
buy pattern is both an entry point for a long position and stop-loss point
for shorts. The Simple Sell pattern, as shown in the figure below,
comprised of two columns of Os and one intervening column of Xs, occurs
when teh current column of Os falls one box below the lowest O of the
prior column. The simple sell pattern signals the traders to liquidate long
positions and to short the security.

Simple Buy

Simple Sell

The Complex Buy and Sell Patterns

There are eight buy and sell patterns that are considered useful, including
the simple buy and sell patterns.
The Buy Signals

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B-1--Simple Bullish Buy signal (or Double Top)

The most basic of all signals, the Simple Bullish Buy signal, is formed by a
column of Xs, then a column of Os, then a column of Xs. This is the
Simple Buy above.
B-2--Simple Bullish Buy with a Rising Bottom

The Simple Bullish Buy with a Rising Bottom is similar to B-1 except the
bottoms of the B-1 and B-2 differ. In B-2,the bottom O in the most recent
column of Os is higher than the lowest O of the preceding O column, which
is not present in B-1. Having rising bottoms means support is coming into
the market at progressively higher prices with each decline, and that
makes the signal stronger than the B-1 which does not have rising
bottoms.
B-3--Breakout of a Triple Top

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The Breakout of a Triple Top Pattern is composed of five columns, three Xs

and two Os. The first two columns of Xs peak at the same level, while the
current X column rises one box higher than the tops of the prior two
columns.
B-4--Ascending Triple Top

The Ascending Triple Top is actually two simple bullish signals (B-1 and/or
B-2)given in succession in five columns. If the bottoms are rising along
with the rising tops, it's more bullish than if the bottoms are horizontal.
B-5--Spread Triple Top

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The Spread Triple Top is similar to the Breakout of a Triple Top (B-3)except
that it is spread over seven rather than five columns because one rally
failed to match or exceed the highs of the prior X columns and it thus
takes an additional X column to break the horizontal resistance.
B-6--Upside Breakout above a BullishTiangle

The Upside Breakout above a BullishTiangle is created by resistance

(supply) coming into the market at progressively lower levels with each
rally, thus keeping each succeeding column of Xs from rising as high as the
prior column, while support (demand) comes in at progressively higher
levels with each decline as revealed by rising bottoms. A buy signal is
generated when the upside breakout occurs, which means a column of Xs

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rises one box higher than the high of the preceding X column. The triangle
is bullish because the last signal prior to the start of the triangle was a buy
signal.
B-7--Upside Breakout above a Bullish Resistance Line

The resistance line in the Upside Breakout above a Bullish Resistance Line
is drawn as a 45 degree line up and to the right beginning from the lower
right hand corner of the lowest box containing an O not bordered by an X
on its right. The longer the resistance line holds, i.e. the mroe columns of
xs that approach the resistance line but fail to break through, the more
bullish the ultimate breakout.
B-8--Upside Breakout above a Bearish Resistance Line

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In the Upside Breakout above a Bearish Resistance Line, the security is in

a steady decline, trading within a bearish channel defined by an upper
resistance line and a lower support line both moving down at a 45 degree
angle as they extend from left to right. The buy signal occurs when an X
column both breaks through the resistance line and rises one box higher
than the highest X of the prior column.
The Sell Signals
Based on Point and Figure's symmetry, all sell signals are the exact
opposite of the buy signals. There are eight types of sell signals.
S-1--Simple Bearish Sell

The Simple Bearish Sell signal occurs when the prices falls, rises and falls
again with the current decline or current column of Os dropping one box
below the lowest O of the prior column of Os. When the Simple Sell occurs,

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it suggests that the traders close out their longs, also consider a short sale
if prefer.
S-2--Simple Bearish Sell with a Declining Top

The Simple Bearish Sell with a Declining Top is more bearish than Simple
Sell (S-1), because it has a declining top as evidence that selling pressure
is coming in at lower levels.
S-3--Breakout of a Triple Bottom

The Breakout of a Triple Bottom evolves from a price decline, an upside

reversal, a second decline that meets downside support at the same level
as the lowest O of the prior declining column, a second rally which fails to
break out on the upside and a third decline which drops one box below the
lowest Os of the prior two columns.
S-4 Descending Triple Bottom

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The Descending Triple Bottom is composed of a column of Os, a rally of Xs,

a second column of Os which declines one box below the low of the prior
declining column, followed by a second price rise succeeded by a third
decline signalling the sell by fallling one box below the low of the prior
decline.
S-5--Spread Triple Bottom

The Spread Triple Bottom has the basic triple bottom design of the S-3,
but the formation is spread over seven rather than five columns.
S-6--Downside Breakout of a Bearish Triangle

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The Downside Breakout of a Bearish Triangle originates from an earlier sell

signal followed by a major decline. After the decline, support develops and
a rally occurs which finally gives way to a new decline that bottoms higher
than the low of the prior declining column. The next rally falls short of the
high of the preceding rally and the price again declines. The formation is
completed and a sell signal generated when an O column declines below
the lower support line
S-7--Downside Breakout Below a Bullish Support
Line

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The Downside Breakout Below a Bullish Support Line occurs when there is
a downward penetration of a well defined bullish support line.The bullish
support line is the 45 degree best-fit line of bottoms and the the
penetration must completely clear the support line, not just touch or
straddle the box through which it crosses from lower left to upper right, as
well as decline one box below the lowest O of the prior column.
S-8--Downside Breakout Below a Bearish Support Line

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The Downside Breakout Below a Bearish Support Line evolves from a

sudden breakout below a bearish support line running from upper left to
lower right at a 45 degree angle which held repeatedly in the past.
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