Learning to read Price Action with P&F Charting

I am working on that right now

 

so if this is to be done on a day to day basis it is probably better to do it with futures because you would have 3 charts open rather than 3 charts open for every single stock you are interested in leading to more chances to fail.????

 

I don't daytrade stocks, but if I did, I would use just one chart if I were trading many stocks simultaneously. The three charts would work ok, but it would be difficult to keep up with multiple charts on multiple stocks.

 

Somebody can help me.....P&F what is the signification of those 2 letters?

 

It is difficult for me to copy and paste something from ES as examples because I would have to manually cross off the results of setups so I am going to have to use stocks right now that have current setups.

Here is a chart for corning. It is a 1.0 chart. Right now we have a double bottom. If this were real time chart we would not be using a 1.0 to daytrade this stock so just pretend it is ES. We don't know if this stock is going to continue down. What we do know if this double bottom reverses we will probably have a strong signal.

We need three points for a reversal so a reversal will occur at 25.00. To get a double top buy signal it will need to get to 26.

So even though it has not reversed as yet we place an order to go long at 26.00.

our stop will be at 21.00 if the stock does have a reversal.

 

It stands for Point and Figure. It is just a description of the method.

 

Let me make sure I understand the concept fully. You could also put in an order to go short at 24.00, as that would be a sell signal. Correct? (And if one order is placed, cancel the other, I assume.)

 

We could also enter an order to go short below the last 0 column low?

 

If you wanted to take this signal short you would have to place the order short at 21.00. This is where you would get a double bottom sell signal.

That signal would not be as strong as the potential double bottom failure so I would not trade it.

Any double bottom that reverses during an upward trend is normally a very strong signal.

 

Here is a chart for Costco. As you can see this chart is potentially setting up for a bearish reversal signal. We have had 7 straight columns of lower highs and lower lows. Should this reverse to 67.00 it will probably move up substantially more.

What is more likely to happen is we will end up getting some other signal before this signal is reversed, but you still should be aware that a bearish signal reversed could be coming and look for an opportunity to go long on this stock on any bullish signal.

If you are a pattern trader it definitely looks like a pennant, but pennants are not automatically considered a buy signal in a pnf chart.