Mixing it up with P&F

The last week has been an interesting week for a number of reasons, but I will focus on one today.

Lately I have been looking at volume by price as well as extending my timelines into weekly charts for some trending analysis. I have always stood by the idea that price tells the whole story and trading can be performed without regard to the fundamentals of the underlying company...I still do so that has not changed.

I have resisted using Point and Figure (P&F) charts for some time. Someone suggested that I look at them but I couldn't drag my eyes back to such a primitive looking chart after playing with the nice graphic presentation of the candle charts with all the great tools and overlays. I didn't get them at first glance so I discounted their usefulness.

I finally broke down and looked closely at the P&F charts. Although I may regret not doing this earlier I don't think that I would have appreciated what the charts were about before.

The key is that P&F charting is only price dependant not time dependant. I choose to add the volume levels in as I think that they add to the information available.

Here is a chart that I picked from a scan that I ran for possible trade setups. I scanned for stocks that had a new box that day, which indicates that the price has gone past the established range.

NIKE:
The current price is in red to the right. The trendlines are placed automatically, the volume below represents the volume for the particular row of Xs or Os while the volume on the side represents volume at those particular price levels. These can give more credence to a support or resistance level as large volume at a higher level could indicate that sellers are agressively selling at that level ...there is some interpretation involved here.

To trade based on this chart the entry price would be in the low $49 range, stop at $47 perhaps.

Here is the candle chart for the same time period:

The previous low in May was $48.76 so if that price was to act as support then the $49.00 would be a good entry price with a tight stop. The key would be to keep the stop tight as anything below that May low would likely be followed by even lower prices.

I'll clarify a plan for entry and stop settings in another post.

Jeff.