Date: 30th December 2018

The Point & Figure chart facilitates defining and identifying price patterns in an objective manner.
Objective price patterns are useful in a variety of ways. It helps in deciding the trading levels and lending
itself to the possibility of scanning and back-testing these patterns. We shall discuss a few major P&F
bullish patterns in this newsletter along with current chart examples.

Four-column triangle

Have a look at the chart above which illustrates the four-column triangle pattern. This pattern captures
significant congestion in price where three price-swings have been contained within their corresponding
previous swing. It is very difficult to define convergence in this manner otherwise.

Four-column triangle breakout is range or consolidation breakout pattern. A double-top buy after
triangle is a bullish triangle breakout and double-bottom sell pattern after triangle is a bearish triangle
breakout.

Below is a chart of LIC housing finance showing 4-column triangle breakout

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Current formation in LIC housing finance chart is a four-column triangle breakout. First column of the
triangle is Anchor column that makes this pattern more interesting. This breakout also qualifies as a
bullish ABC pattern breakout. A bullish triangle breakout pattern remains valid as long as price remains
above 478 levels in LIC Housing Finance.

Broadening Pattern

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Broadening pattern is like a megaphone or an expanding formation where every swing is wider than
previous swing. It is truly a difficult phase for trend followers because they often get stopped out and
breakouts tend to fail miserably. The price typically gets into a trending phase after such an expanding
formation. We recommend trading follow-through to broadening formation as illustrated in the above
image.

Below is a chart of Canara bank showing broadening follow-through pattern.

A double-top buy pattern is triggered in the Canara bank chart above. This pattern occurs after the
completion of the broadening pattern. The double-top buy in this chart is the follow-through breakout
to the bullish broadening pattern. The trend would remain bullish if price trades above 265 levels.
Alongside the broadening pattern, there is another bullish pattern called a follow through to the bullish-
100% pole. The 100% pole pattern is discussed below.

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100% Pole

100% pole is a pattern that shows a sharp reversal to the prior trend. This pattern price represents a
complete retracement of the prior move. In fact, a bullish 100% pole is a combination of various
patterns such as low-pole, bear-trap and a double-top buy. A follow-through breakout to 100% pole
pattern is a strong signal which offers a high-probability trade set-up with relatively low risk.

The scanner feature in the TradePoint software can be used to identify stocks where a 100% pole
pattern has been completed. We used this scanner to generate a list of stocks where this pattern was
competed on December 28, 2018. We back-tested the performance of this pattern in these stocks. Here
is the result of the back-test.

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The Adani Enterprises stock has an impressive hit ratio and expectancy for this pattern. Below is a chart
of Adani enterprises.

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As you may notice, the double-top buy breakout in the stock is a follow-through to the 100% pole
pattern that occurred above bullish 45-degree trend line. A bullish Super pattern breakout is also
competed in this chart. The trend will be bullish until the price trades above 152 levels.

Below is a chart of Petronet.

The recent chart pattern is follow-through to a bullish 100% pole as well as bullish broadening pattern.
Price has bounced from previous support levels and registered a breakout above down-sloping 45-
degree trend line. Price is bullish if it trades above 221.

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Triple-top buy

Triple top buy is a pattern that shows resistance breakout. We can run it on 1% box-value chart for
momentum investments. Below is a chart of Inox where Triple-top bullish breakout pattern is triggered.

Notice that Triple-top buy pattern in the above chart is also a four-column triangle breakout, and follow-
through to bullish 100% pole from which bullish vertical count has become active. The trend will be
bullish unless price falls below 215 levels.

Catapult buy

Catapult is a popular P&F chart pattern. This pattern can be defined as double-top buy occurring
immediately after a triple-top buy pattern. In other words, this pattern is nothing but a follow through
buy to the triple-top buy pattern.

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Below is a chart of IDFC explaining that.

A bullish catapult price pattern was completed in the 1% box-value chart of IDFC. And a bullish ABC
pattern is completed in the 0.25% box-value chart of IDFC. Chart is bullish unless price falls below 39.

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Sector to track
When we divide price of one sector by another, we get a ratio. A rising ratio line indicates
outperformance of numerator while the falling ratio represents underperformance. If we divide price of
each sector with every other sector, we get to know the performance of any sector against every other
sector.

Below is a table that does that. Score is 1 and ratio is green when a sector is outperforming, it is red
when it is underperforming.

Table shows that PSU bank, CPSE, Media and Financial services are outperforming. Metal, IT and Pharma
are underperforming against most of the other sectors.

You can use the Ultimate Matrix feature in the TradePoint software to generate the above table. You
can run this daily to get an idea of which sectors are doing well.

Use 0.25% box-value for assessing short term performance and 1% box-value for medium term analysis.

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Momentum levels

Add below mentioned stocks in your watch list when mentioned levels are crossed. Levels are on cash
(spot) basis.

DTB Level: Bullish breakout level

DBS Exit Level: Exit level once bullish breakout gets formed

DBS Level: Bearish breakout level

DTB Exit Level: Exit level once bearish breakout gets formed

You can view above table in Smart Scanner menu in TradePoint.

Scanner-> Smart Scanner -> P&F Level Picker

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