P&F Pattern Alerts
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Whenever common chart patterns appear on the right side of our Point & Figure charts, we will display an “alert” with the name of that pattern near the top of the chart. Members can also create custom scans that find stocks with these patterns. Here is a list of the various kinds of P&F chart patterns that we currently detect.
Buy and Sell signals are very simple patterns that should be confirmed before placing a trade. The P&F Buy signal is used when calculating the various Bullish Percent indices.
A buy signal occurs when a column of X's exceeds the previous column of X's. The buy signal remains in effect until a sell signal occurs.
A sell signal occurs when a column of O's drops beneath the previous column of O's. The sell signal remains in effect until a buy signal occurs.
Double tops and bottoms are the simplest point and figure patterns to identify. In turn, they form the building blocks of all other patterns.
In a double top, prices rise to a certain level and then retreat because the supply outstripped the demand at that price. If prices rise again to the level at which they retraced before, the double top is achieved. If prices continue to carry through that level, a double top breakout is recognized by our alert system. The double top breakout alert implies that the buyers are now creating more demand than there is supply at the level of the double top and we have a breakout.
Double bottoms are similar to double tops, but in reverse. Prices fall to a certain level and then reverse because the demand outstripped the supply at that level. If prices fall again to the level at which they stopped before, it is called a double bottom is achieved. If prices continue to fall through that level, a double bottom breakdown is recognized by our alert system. The double bottom breakdown implies that the buyers who were supporting the price are no longer able to create demand that exceeds the supply, resulting in price breakdown.
A triple top breakout is similar to a double top breakout, except that the prices break out after retracing from the same level twice. This implies that the price level is a more significant area of resistance (an area where sellers are willing to sell the stock and create supply that outstrips demand) than what is seen on a double top. The breakout above this level implies that the buyers are now creating more demand than there is supply and therefore the prices are breaking out.
A triple bottom breakdown is similar to a double bottom breakdown, except that the prices break down after retracing from the same level twice. This implies that the price level is a more significant area of support (an area where buyers are willing to buy the stock and create demand that outstrips supply) than what is seen on a double bottom. The breakdown below this level implies that the sellers are now creating more supply than there is demand and therefore the prices are breaking down.
A quadruple top breakout is similar to a triple top breakout, except that prices break out after retracing from the same level three times. The fourth time, demand outstripped supply at the price level, and prices broke out with a quadruple top breakout.
A quadruple bottom breakdown is similar to a triple bottom breakdown, except that prices break down after retracing from the same level three times. The fourth time, the supply outstripped demand at the price level, and prices broke down with a quadruple bottom breakdown.
An ascending triple top breakout is a series of three tops, each higher than the previous top. The pattern is formed by two consecutive double top breakouts. The idea is that demand continues to outstrip supply on an ongoing basis.
A descending triple top breakdown is a series of three bottoms lower than the previous bottom. The pattern is formed by two consecutive double-bottom breakdowns. The idea is that supply continues to outstrip demand on an ongoing basis.
A triple top breakout followed by a double top breakout is recognized as a bullish catapult breakout. The implication is that there was supply at the triple top level that was keeping prices from going up, but the triple top breakout took some of that supply away. Prices then retraced, allowing more buyers to create demand and power the up move in prices.
A triple-bottom breakdown followed by a double-bottom breakdown is recognized as a bearish catapult breakdown. The implication is that there was demand at the triple bottom level that was keeping prices from falling, but the triple bottom breakdown took some of that demand away. Prices then reversed up, allowing more sellers to create supply and power the down move in prices.
This pattern is a series of rising tops and bottoms that finally soaks up all demand; the double bottom breakdown at the end signals that now supply is outstripping demand.
This pattern is a series of falling tops and bottoms that finally soaks up all the supply; the double top breakout at the end signals that now demand is outstripping supply.
Triangles are formed when both the supply and demand for the stock are drying up. Prices neither rise nor fall, resulting in an equilibrium between buying and selling. This is indicated by rising bottoms and falling tops which combine to form the triangle. In a bullish triangle breakout, this stalemate between buyers and sellers is resolved by a double top breakout.
This pattern is identical to a bullish triangle breakout, except that the stalemate between buyers and sellers is instead resolved with a double bottom breakdown.
This pattern is recognized when the prices drop 20 boxes or more. After such a steep decline, the first reversal provides a good trading opportunity, but the steep drop should give the buyer pause.
A bull trap is a triple top breakout in which only one box is made, followed immediately by a reversal. The breakout is possibly due to buy stops being hit just above the resistance level, and the quick reversal suggests lower prices ahead.
A bear trap is a triple bottom breakdown in which only one box is made, followed immediately by a reversal. The breakdown is possibly due to stop-loss orders or short orders being hit just below the support level, and the quick reversal suggests higher prices ahead.
A spread triple top breakout is similar to a triple top breakout; the difference is that the two retracements do not have to precede the current column immediately. This alert implies that the price level is a significant area of resistance (an area where sellers are willing to sell the stock and create supply that outstrips demand). The breakout above this level implies that the buyers are now creating more demand than there is supply and therefore the prices are breaking out.
A spread triple bottom breakdown is similar to a triple bottom breakdown; the difference is that the difference is that the two retracements do not have to immediately precede the current column. This implies that the price level is a significant area of support (an area where buyers are willing to buy the stock and create demand that outstrips supply). The breakdown below this level implies that the sellers are now creating more supply than there is demand and therefore the prices are breaking down.
The high pole warning is given when a chart rises above a previous high by at least 3 boxes, before reversing to give back at least 50 percent of the rise. The reversal implies that the demand that was making the prices rise has given way to supply pressure. The pattern is a warning that lower prices could be seen in the future.
The low pole reversal is seen when a chart falls below a previous low by at least 3 boxes before reversing to rise by at least 50 percent of the fall. The reversal implies that the supply making the prices fall has been absorbed, and demand is taking over. The pattern alerts that higher prices could be seen in the future. The ideal buy point would be on another reversal back down to be closer to the stop-loss point. This would also set up a double top breakout if the prices reverse up and break over the current column's high.
