The beauty of the Point & Figure chart is that the chart has no preconceived bias. A Point and Figure chart doesn’t care who owns the stock, or who likes the stock…or even if somebody just predicted some stock would double in the next 12 months.
The chart only cares about the daily highs and lows of the stock price, that’s all!
And over time — that alone — tells an interesting story of its own.
Which is why it is so easy to spot mutual funds, sectors and individual stocks that are about to collapse — very often, they give a LOT of clues! Red flags — like multiple sell signals, support line breaks, relative strength signals…they often come in bunches, so it’s easy to tell when trouble is brewing.
And I see them all the time.
Notice I wrote that Point and Figure can be EASY. That’s E-A-S-Y, meaning you don’t need a PhD, or a Harvard MBA to see what’s happening with your investment.
Well, if it’s so easy, why don’t more people use point and figure charts?
It is true, once you get the hang of the charts, they DO become easy.
Easy, but not SIMPLE.
The biggest problem with using charts is that you have to review the changes every day, and that is something a lot of folks just cannot be bothered doing. Does it get you into some good situations too early? Yes. But does it get you OUT of some situations before a meltdown? Yes, it often can. But people want instant gratification today, not more work.
And using point and figure charts can be work.
But here is the rub: look, no system is perfect, but after twenty-plus years of doing this professionally, I have found that the point and figure charts work extremely well in helping us manage the RISK in your portfolio.
And here is why: they do not offer excuses why something things did not work, they do not blame something (or somebody) else when things go unexpectedly.
I like that.
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