Support Lines and Point and Figure Charts
If you have seen my other video lessons on point and figure charts, you know that support lines often act like brick walls. And point and figure charts tend to drift down toward support lines and often (but not always) bounce off the brick walls of support.
Using point and figure charts, there’s NO way we’ll know from day to day precisely what will happen with the market. This video (below) was created right before the market opened on Wednesday July 25. I think it is important to keep in mind that while the headlines have distracted us (and worried us), some of the major stock market indices like the Dow Jones and the Standard and Poor’s 500 Index have been quietly building bases and testing support on their point and figure charts.
One of the best approaches to take is take identify point and figure charts we like, wait for the chart to approach the support line, and buy near support. Here is an example:
Suppose you find a point and figure chart you like, with the price around 44, with support at 42. There’s just a few points of risk, if you have a stop under the support line.
Yes, it can be upsetting to buy a stock and get stopped out right away, but when a stock breaks a support line, it is an important change in trend.
Point and Figure charts can change, and support lines can be broken. We have a game plan to manage the risk, but we need to remain flexible in our approach. As I have written many times: when the charts change, we WILL change.
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