Learning to read Price Action with P&F Charting

Quote from dentist007:

p/f for fx
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from 3/07/08

WOW... this thread became a wasteland during the climax, didn't it.

It was at this time the NYSE BPI was at... ... 14%. the reversal up to 20% created a THIRD consecutive higher bottom and also another divergence from price.

Tell me the market can't scare the bejesus out of us! This is the time I had to argue with people I was consulting with to get ready to buy... most wanted to sell... ...

I was scared shytless, myself. But I have learned that this emotion is one of the best contrary indicators I know.

Especially when I can trust the BPI's.
 
Quote from TradinMadMan:

obviously, someone doesn't know what's going on here.

Good charts and commentary dentist.
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From 3/14/08

Yes - someone was trolling. Is this where it begins to get ugly?!?
 
Quote from mdszj:

All

Just wondering if it may be a good time to go long SDS (2x inverse S&P) based on current pnf chart: http://stockcharts.com/def/servlet/SC.pnf?chart=SDS,PLUADANRBO[PA!B20!B50][D][F1!3!1!!2!20]&pref=G

The chart shows that SDS now has a O in the 68-69 box, which looks like a support box. It can go as low as 67.01 before it fills in the next lower box (67-68). Closing price as of Fri 4/10 was 67.13, so it looks like it is very close to a good support level and stop loss point.

My trade would be: go long SDS now, down to as low as 67.01. Set stop at 66.99 because if it goes lower than this, looks like the next lower support it could go to is a O in the 65-66 box. Assuming you get in at 67.13 and then get stopped out at 66.99, this is a 0.2% loss (not too bad).

If stopped out I would then watch it when it reaches the 65-66 level and jump in at this level (somewhere in the 64.01 - 65.99 range).

Does anyone have any thoughts on this trade? Any ideas welcome, thx.
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From early April, 08



NYSE and SPX bullish percent indexes in bull alert status... at mid levels.

Effectively short 2 beta (long SDS) is backwards.
 
Quote from mdszj:

All

After looking at the pnf chart for MZZ, this morning I put in a limit order to buy MZZ at 44.99 and also at 44.49. If it gets filled I will put in a stop at 43.99.

Assuming I only get filled at 44.99, then get stopped out, this would be a loss of 2.2%. If both orders get filled, my avg price will be 44.74, so if I get stopped out my loss would be 1.7%.

It looks to me like the potential target would likely be in the 48-49 box, so if you assume target = 48, this would be a gain of 6.6% (if filled at 44.99) or 7.3% (if filled at avg price of 44.74). So it looks like the reward:risk would be roughly 3:1.

ANy thoughts on this trade? I used a pnf with box size of 1.
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From 4/24/08


Another inverse fund (short) into a bullishly configured market?

Gave 4 or 5 bearish signals by the time this order was entered... didn't give a buy signal until July and that was a false signal (first in the strong trend).
 
Quote from mdszj:

As of EOD on 7/27/09, there were 1262 NYSE stocks that currently have a buy signal, out of a total of 1819 NYSE stocks. Does this mean that the remainder (557 stocks) are currently on a sell signal?

http://stockcharts.com/charts/NYSEBPI.html

thx
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From July '09

Yes - expressed properly for the Bullish Percent index, 69.3%+ stocks are bullish (controlled by demand/on PnF "buy signals"). Getting overbought, but still in X's and controlled by demand.
 
Quote from tortoise:

Um ... no, that's not what I'm saying. Nice straw man, though!

As an aside, the "trader effect" has distorted some of those classic concepts: We've had a triple top or two this year that didn't quite pan out, didn't we? I certainly won't ignore triple tops (or bottoms) as a result. But I won't invest a lot of significance in them either.

The secret sauce is "nuance," something sorely lacking in PnF and other over-simplified approaches to the interpretation of market action. Here's my guess: ANYONE who thinks that some charting methodology from the 1890s is going to carry them through today's markets is fooling themselves.
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From 1/3/09

I used to watch brokers grab the breakout page of DWA's (then faxed) daily commentary, pick a name because it had a "triple top breakout", get on the phone with their clients and say "XYZ had a triple top breakout! I think we should add a hundred to your account!!". (They didn't even have the juevos to pitch 500 for an account!)

They had no courage or conviction. They wouldn't know how a triple top was formed on a PnF chart to save themselves. Unfortunately, they were all too common - like about 95% of the others. Lemmings.

Their triple top would breakdown and they'd complain the method is junk. What they wouldn't take the time to do was learn how the signal fits into the bullish percents and what that says about the market. Most of the time, they could care less. Buy at the top - sell at the bottom... any client could at least do that or more! The brokers wanted good performance, but they weren't interested in putting forth the effort to even TRY to understand the premise beneath the methodology.

They had no:
1) trading plan
2) psychology/discipline to stick to a plan (if they had one), or no
3) money management skills.

In typical form, they'd blow accounts up and rebuild their book. They had good intentions, but when it came down to it, they were either too lazy to learn or too dumb to comprehend the simplicity. They were arrogant, ignorant, egotistical and narrow-minded.
 
So what you are saying is that you still need to do your analysis of the overall market?

I have just begun studying PnF so its all really new to me. I see you have done a lot of work by commenting on old post.

Great work
 
Quote from TTTrrr:

HolyGrail and older user have BEB.
You never questioned the fact that the lines of support and resistance in the soft BEB not ever executed? "In all books on P&F said that the lines exist, but if BEB on these lines to trade it will always be the loser.
Not asked this question ever? "The answer is very simple. The problem is in bad BEB drawing X and O. A simple example.
Compare the graph drawn by BEB and schedule drawn in http://stockcharts.com. The laws of painting P&F are the same, but BEB schedule does not look like the graph in http://stockcharts.com WHY?

1-
If you want to have a correctly drawing P&F, then have a link _http://www.gummy-stuff.org/PandF-charts.htm. Do not hesitate Excel correctly draws the schedule and line resistance and support in these graphs correctly.
2-
Pay attention to the label "box". If the Excel table where to write number more> 1, the schedule will have a strong filter.

This method is the filter I see the first time. Thanks to Peter Ponzo.
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From 1/7/10

I agree with this post. The link displays the flowchart for proper chart construction.

http://www.gummy-stuff.org/PandF-charts.htm


Post looks kind of neural, though... ...


I noticed Motorman from Trade2Win's forum stepping in the mix...

14 hours - 260 pages. Excellent thread. I really left my mark... I'll check back in March.

btw - BPI is on DEFENSE right now...
 
I want to warn those who make the analyzer assistant or a robot for P&F using the index strength (RS).
Index of force always count on Close.
RS = CLOSE price paper / CLOSE price index (eg DJ).
If you'll apply the High and Low, you can turn out a paradox when a division is High <Low.
=========
Sample:

Paper
High=3
low=2

DJ
High=4
low=2

RS High=High paper/High DJ=3/4=0.75
RS Low=Low paper/Low DJ=2/2=1
RS High(0.75) < RS Low (1)
========
In order to avoid the paradox, we must apply the Close paper and Close DJ.
P.s.
Soft BEB used only Close for RS.
 
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