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Point and Figure

 

A point and figure chart is a technique in charting that disregards the passage of time and only charts changes in prices.  In constructing a point and figure chart, a "box size" is first defined as the minimum movement in prices that will occur before a plot of the price change will occur.  An "X" is displayed when prices rise by the "box size" and an "O" is plotted when prices fall by the box size.  No X's or O's are displayed if prices rise or fall by an amount that is less than the box size.
Every column in the chart can contain either X's or O's but not both.  When prices reverse, they must reverse by a reversal amount that is then multiplied by the box size before a new column is created. A new column therefore signals a change in the price trend.  For Point and Figure Charts, only significant prices changes are depicted on the chart.  The usual box size is 1 or 2 points for medium priced stocks and 3 to 5 points for higher priced stocks.  Reversal amounts are usually defined as being double or triple the box size.
The Point and Figure Chart allows for a visually clear sense of support and resistance levels.  Breakouts from a particular level can give indication of where the trend in prices is headed in the future.  The longer a price plot moves in a consolidation or sideways movement, the stronger the reaction can be on a breakout. These charts allow investors to analyze various price formations and spot buy and sell signals through trendline penetrations and breakout from support or resistance levels.  Point and figure charts also allow for a quick assessment of the overall trend of the market and in potentially determining whether price is at risk of reversal. 

  

Below is a graph of Louisiana-Pacific Corp during the same time frame only plotted as a candlestick chart of daily prices.