Point and figure analysis and projection
by Charles Idol
When you start point & figure chart (P&F) analysis, you should start with longer-term data and a l´3
chart like Figure 1, the P&F chart for AT&T. (See "Point & figure charts: An overview," Stocks &
Commodities, March 1989.) AT&T falls under the influence of the downtrend line formed by connecting
the tops of columns 11, 13 and 21. While this line holds, any short-term patterns indicating upward price
action tend to be optimistic. Price action on the l´l chart (Figure 2) covers a slightly different time period.
(To tie the charts together, note that at the beginning of 1986 — column 6 in Figure 1 — AT&T is rising
from a bottom.)
The congestion zone between columns 7 and 15 of Figure 2, with an upward break at a price of $27 in
column 16, looks interesting. Experience says that the number of Xs and Os in a horizontal line
(including the blank spaces between letters) is the number of points a stock, a group of stocks or market
average will advance from its deepest low or decline from its peak high. A count of nine across the $24 price line, therefore, gives a possible objective of $33, for a 22% gain if a commitment is made at $27. ...