Point and Figure Price Patterns

Pattern identification is also possible on point and figure charts. As you can see, they're not much different from ones already discussed on bar charting. Most of the patterns are variations on the double and triple tops and bottoms, head and shoulders, V's and inverted V's, and saucers. The term "fulcrum" shows up quite a bit in the point and figure literature. Essentially, the fulcrum is a well defined congestion area, occurring after a significant advance or decline, that forms an accumulation base or a distribution top. In a base, for example, the bottom of the area is subjected to repeated tests, interrupted by intermittent rally attempts. Very often, the fulcrum takes on the appearance of a double or triple bottom. The basing pattern is completed when a breakout (catapult) occurs over the top of the congestion area.

Those reversal patterns with the most pronounced horizontal ranges obviously lend themselves quite well to the taking of count measurements. The V base, in contrast, because of the absence of a significant horizontal price area, would not be amenable to the taking of a horizontal count. The blackened boxes represent suggested buying and selling points. Notice that those entry points generally coincide with the retesting of support areas in a base or resistance areas in a top, breakout points, and the breaking of trend lines.