What generates a sell signal on a point and figure chart?
The easy answer is “the price going down!” And you would be right. But that’s kind of a “flip” response.
The number one question I get asked is “Tom, tell me WHY the stock is going down!”
That’s a tougher question to answer. Since many times, point and figure charts begin moving down (because others are selling) well before any kind of news is published. Which is why if you make investment decisions by reading the newspaper, you WILL be in the newspaper (the obituaries). We simply cannot wait for the official news, to make a decision whether to make a change in our investment.
Point and Figure charts are moved ONLY by price. When you look at a point and figure chart, all you see are columns of X’s and columns of O’s. The columns of X’s go UP, the columns of O’s go DOWN. You will never see X’s and O’s mixed in the same column. When one column of O’s goes further down than the previous column of O’s, the chart generates a sell signal.
If you are relying on a blog post for specific investment advice, you are making a huge mistake. Please speak with an investment adviser before making ANY investment decisions.
If you do not have an investment adviser, we encourage you to contact Mullooly Asset Management at 732-223-9000, or through our website. Under no circumstances should the content discussed here to be considered specific investment advice.
Please note this is an ANALYSIS, not a recommendation to buy or sell this fund. In fact, none of the securities analyzed represent past specific recommendations of Mullooly Asset Management.
Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be profitable or equal to past performance levels.
All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions, or withdrawals may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for an investor’s portfolio.
Now… one sell signal by itself is not the end of the world, not a reason to rush right out and tear apart your investment portfolio.
However, when a chart begins to give multiple sell signals in a short period of time, we need to pay attention. Something could be wrong.
I have a great example of these kinds of sell signals on this video. Take a look:
(once complete, jump to part II on this topic)
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