Learning to read Price Action with P&F Charting

[HolyGrail]

When a stock breaks through its bullish support line it is basically letting you know that there is no longer a clear trend.

When you are long a stock you should sell on any pnf sell signal UNLESS you are still above the bullish support line.

In this case you had a sell signal which also drops below the bullish support line. That is two strikes against you. The negative relative strength is strike three, IMO.

 

[subq]

Quote from HolyGrail:

There are two types of methods to project price. One is the vertical count method, and the other is the horizontal count method.

Both methods should only be used after significant bottoms or tops.

First we will talk about vertical column price objectives. Once a stock makes a significant bottom you take the first buy signal off of that bottom and count the columns of that first reversal. Obviously you have to wait for that x column to complete before you can do this. Let's say the buy signal comes from a column that has 9 boxes.

The formula would be as follows 9*box size* reversal size or, in this case (my example will be the stock APC) 9*1*3=27. You would take that 27 and add it to the low point of the 9 box column which in this case is 40. The price projection would be 67.

There was a new significant low on APC in January of this year. Based on the first buy signal after that low APC should make it to 89. We will get to see in real time if it works.

I guess the main problems with these projections is you don't know what a significant high or low is until the move is pretty well under way.

Also as a note, some pnf'ers like Dorsey believe the formula should be column length* box size* 2 for short signals. This is used to account for the natural long bias of the market.

Maybe someone else can do the horizontal count. If not, I will do it when I get back. I am off to Austin, as one of my sons is graduating from the University of Texas today.

For some reason the chart would not upload .

http://clalloys.com/apcVerticalCount.png

Since you mentioned targets, I would also point out that Bullseye does not calculate price objectives normally...that is, vertical price targets as traditionally calculated.

 

[HolyGrail]

Quote from subq:

Since you mentioned targets, I would also point out that Bullseye does not calculate price objectives normally...that is, vertical price targets as traditionally calculated.

I haven't checked his horizontal count, but his vertical count is correct. He basically takes the count of the column that has just given a buy or sell signal and multiplies the box size times the column count times 3 and adds it the the bottom of the column that created the signal.

Now I mentioned that dorsey recommends multiplying times two on shorts, but bulls-eye still uses 3.

 

[subq]

Quote from HolyGrail:

I haven't checked his horizontal count, but his vertical count is correct. He basically takes the count of the column that has just given a buy or sell signal and multiplies the box size times the column count times 3 and adds it the the bottom of the column that created the signal.

Now I mentioned that dorsey recommends multiplying times two on shorts, but bulls-eye still uses 3.

However, the traditional rule is that the X (or O depending on the direction) column must be completed in order to establish a count. It appears he is doing the count of a column that is not completed yet.

 

[HolyGrail]

Quote from subq:

However, the traditional rule is that the X (or O depending on the direction) column must be completed in order to establish a count. It appears he is doing the count of a column that is not completed yet.

Yes, but he does show on the count that it is not completed as shown in the attachment.

 

[HolyGrail]

I just checked the horizontal count on bulls eye broker, and it seems fine as well.

 

[subq]

Quote from HolyGrail:

Yes, but he does show on the count that it is not completed as shown in the attachment.

...the problem with that and one of the reasons for the rule... is that the column must be complete to have a set target, otherwise, the target could change as the column continues to change

 

[HolyGrail]

I think you are being a little picky. Even though the column is incomplete that is what the target would be had it been complete. At least you have a minimum target because the vertical target cannot go any lower.

Personally I like horizontal targets better because they are much more conservative.

 

[yayt]

Maybe a ridiculous question, but, how often are these price targets hit?
i.e. what is the reliability of these patterns?

 

[HolyGrail]

The horizontal target on the nq is 2052 right now. Let's see if it hits it. I am long with a target of 2051.50. This is on the .5 chart based on the last signal. it stands at 2048.50 as I post this.