swingin' the ftse

[black bear]

The story hasn't changed significantly from last week, so I'm going to stick with the comments quoted. However, I confess I am surprised that the current column of bloo 'X's has got as far as it has without retracing and that the 6500 level has got

Hi, timsk,

thanks for posting chart,

That column of x, how tall does it have to be to be classed high pole, :?:

Can"t remember exact rule but sure if it gives 1/2 of them up in one go that it is regarded by some as sell signal :?:

Its ok , flap over ~ explanation of signal,

The High Pole

Earl Blumenthal, another famous point & figure chartist, developed this signal. The pattern is formed when a column of Xs exceeds the previous column of Xs by at least 3Xs and then gives up more than half of its total gains in the next column of Os. It is less of an actual sell signal than a warning signal. I do not pay much attention to it when the trend is up, but in a downtrend it can be very effective in picking up bear market rallies on the point or during the course of failure.

 

[barjon]

dev,

think it's when a column of Xs exceeds the previous column by at least 3 Xs then gives up more than half. tim will let us know

good trading

jon

 

[timsk]

High Poles

Jeremy du Plessis, in his book 'The Definitive Guide to Point & Figure' reckons that the initial rising column of 'X's (or falling column of 'O's) should exceed the previous column by at least 5 boxes to be effective - i.e. two more than in Blumenthal's original definition. He goes on to write . . .

"Poles can occur in uptrends or downtrends. High poles indicate near-term weakness and low poles indicate near-term strength.

As with all P&F patterns, it is important to consider what is going on in the minds of the participants. Considering the high pole in figure 3-35 (attached), there is a long breakout column of 'X's showing strong demand and buyers prepared to pay up to get the stock. At some stage that demand ceases and the column of 'X's comes to an end. All participants expect there to be a small correction of perhaps 3 'O's to bring the price back, before demand comes back in again, but that doesn't happen. The next column of 'O's is as determined as the previous column of 'X's. Sellers, who are now receiving higher prices, push the price back, trying to find new buyers, but the buyers are not forthcoming because all the available buyers were 'sucked' into the initial breakout column, so the price continues to fall, effectively cancelling out the column of 'X's. The bulls that bid up the stock, especially those who who bought in at the top of the column of 'X's, will be totally shocked. Many, already showing losses, will close their positions, which removes the bulls from the market and adds to the list of sellers. It is the shock reverse column of 'O's that makes the high pole such an important reversal pattern. (My emphasis.) It is as if the buyers have been slapped in the face. After the high pole is complete there is usually, although not always, an unwinding of positions that takes place resulting in some sideways movement in a tight range before a complete breakdown of the pattern takes place."
Tim.

 

[black bear]

Jeremy du Plessis, in his book 'The Definitive Guide to Point & Figure' reckons that the initial rising column of 'X's (or falling column of 'O's) should exceed the previous column by at least 5 boxes to be effective - i.e. two more than in Blumenthal's original definition. He goes on to write . . .

"Poles can occur in uptrends or downtrends. High poles indicate near-term weakness and low poles indicate near-term strength.

As with all P&F patterns, it is important to consider what is going on in the minds of the participants. Considering the high pole in figure 3-35 (attached), there is a long breakout column of 'X's showing strong demand and buyers prepared to pay up to get the stock. At some stage that demand ceases and the column of 'X's comes to an end. All participants expect there to be a small correction of perhaps 3 'O's to bring the price back, before demand comes back in again, but that doesn't happen. The next column of 'O's is as determined as the previous column of 'X's. Sellers, who are now receiving higher prices, push the price back, trying to find new buyers, but the buyers are not forthcoming because all the available buyers were 'sucked' into the initial breakout column, so the price continues to fall, effectively cancelling out the column of 'X's. The bulls that bid up the stock, especially those who who bought in at the top of the column of 'X's, will be totally shocked. Many, already showing losses, will close their positions, which removes the bulls from the market and adds to the list of sellers. It is the shock reverse column of 'O's that makes the high pole such an important reversal pattern. (My emphasis.) It is as if the buyers have been slapped in the face. After the high pole is complete there is usually, although not always, an unwinding of positions that takes place resulting in some sideways movement in a tight range before a complete breakdown of the pattern takes place."
Tim.

Hi timsk,

Really good post as per usual, Do you have any experience trading high pole or does it only appear now and again :?:

Its a funny one your entering a trade against the trend judged by a lot of other methods.

 

[timsk]

Do you have any experience trading high pole or does it only appear now and again :?:

Hi develbis,
No, no experience of trading high poles as such or any other P&F pattern for that matter! I'm not at all keen on any kind of established pattern, be they 'high poles' in the context of P&F charts, 'hammers' in the context of candlestick charts or whatever. I conciously fight this pattern of thinking which so many (inexperienced) traders fall into. I include myself in this group. The thinking goes along the lines of there's a head and shoulders, therefore the instrument is set to tank and I'll short it or, there's a bullish engulfing candle, therefore I'll go long. Lots of people have lost a lot of money thinking like this (me included) and T.A. has earned itself a bad reputation.

Attached is the usual FTSE 100 chart with 2 high poles and 2 low poles that have occured since the June highs. I'm no expert, so I may have missed some or mis-identified the ones shown, so feel free to challenge me! Like I say, I don't pay much attention to such patterns. That said, the first high pole (1st red arrow) would have got you out of a long position near the high or, conversely, got you into a short position. The first low pole (1st bloo arrow) turned out to be a failed signal and would have got you out of a short too soon and/or into a long trade prematurely. However, the second low pole (2nd bloo arrow) would have worked a treat. IF I acted on such patterns, I'd be inclined to take the view that to have the same pattern in straight succession is sooooo unusual that the probability of the second one working out was high. The second high pole (2nd red arrow) is also a failed signal but, arguably, it appears in the context of a downtrend. Given that the high/low pole is a reversal pattern and not a continuation pattern, this 'signal' is at best, weak.

Lastly, if the current column of bloo 'X's is the start of a high pole signaling an iminent reversal, the subsequent column of red 'O's must fall at least as far as 6575, indicated by the bold virtical red line.

Its a funny one your entering a trade against the trend judged by a lot of other methods.

I disagree. By definition, a reversal pattern will get you into a trade counter to the prevailing trend. The first red and both bloo arrows are good examples of this. As such, my personal view is that reversal patterns such as poles are useful as a means for taking some or all profits, but are very dangerous tools to utilize for entering new positions. Just my view of course
Tim.

 

[black bear]

Hi develbis,
No, no experience of trading high poles as such or any other P&F pattern for that matter! I'm not at all keen on any kind of established pattern, be they 'high poles' in the context of P&F charts, 'hammers' in the context of candlestick charts or whatever. I conciously fight this pattern of thinking which so many (inexperienced) traders fall into. I include myself in this group. The thinking goes along the lines of there's a head and shoulders, therefore the instrument is set to tank and I'll short it or, there's a bullish engulfing candle, therefore I'll go long. Lots of people have lost a lot of money thinking like this (me included) and T.A. has earned itself a bad reputation.

Attached is the usual FTSE 100 chart with 2 high poles and 2 low poles that have occured since the June highs. I'm no expert, so I may have missed some or mis-identified the ones shown, so feel free to challenge me! Like I say, I don't pay much attention to such patterns. That said, the first high pole (1st red arrow) would have got you out of a long position near the high or, conversely, got you into a short position. The first low pole (1st bloo arrow) turned out to be a failed signal and would have got you out of a short too soon and/or into a long trade prematurely. However, the second low pole (2nd bloo arrow) would have worked a treat. IF I acted on such patterns, I'd be inclined to take the view that to have the same pattern in straight succession is sooooo unusual that the probability of the second one working out was high. The second high pole (2nd red arrow) is also a failed signal but, arguably, it appears in the context of a downtrend. Given that the high/low pole is a reversal pattern and not a continuation pattern, this 'signal' is at best, weak.

Lastly, if the current column of bloo 'X's is the start of a high pole signaling an iminent reversal, the subsequent column of red 'O's must fall at least as far as 6575, indicated by the bold virtical red line.

I disagree. By definition, a reversal pattern will get you into a trade counter to the prevailing trend. The first red and both bloo arrows are good examples of this. As such, my personal view is that reversal patterns such as poles are useful as a means for taking some or all profits, but are very dangerous tools to utilize for entering new positions. Just my view of course
Tim.

Hi tmski,

This is a good thread,

I Con - Cur , gee that was easy Words of wisdom :arrowu: take note IMO, :!:

Head & Shoulders, that's a shampoo is"nt it :?:

I don"t do patterns be it swing or anything else, must confess did notice a flag while I was holding position just last week intra day, and held a wee bit to long because of it and ended up at scratch instead of nice little gain. To me a pattern is a random event full stop and worth no further discussion.

I use P&F charts or should say look at them because they give quick and accurate visual idea where S&R levels are, and the range of market, absence of time axis adds to the value IMO.

The bit you disagree , I"m not sure we do , I used the words "other methods" and at the end of the day its a pattern, is"nt it

"Its a funny one your entering a trade against the trend judged by a lot of other methods."

I never take a trade at any signal, Bars or P&F, always wait for price acceptance in a lower time frame and trade into position intra day.(don"t mind a few failed attempts) Exception would be a washout bar or buying spike into old range which may flash a change of trend signal which hopefully for me would turn out to be false.

My take is , well I hope we go right back into the top of the last range pretty quick and that high pole gives up fast to 6525/500 so I can get me long on for the old Christmas hamper. Some spiky day action testing the last range would be ideal

Thanks for postin latest P&F, just printed it off and am very

 

[barjon]

well, we clambered up to around 6750 this morning so hands up those who took their 500+ points and called it a day

i'm off piste for a few weeks so you'll have to continue the story yourselves for a bit.

good trading

jon

 

[black bear]

well, we clambered up to around 6750 this morning so hands up those who took their 500+ points and called it a day

i'm off piste for a few weeks so you'll have to continue the story yourselves for a bit.

good trading

jon

Hi Jon,

Sounds like one happy swinger, Good trade Jon,

I can see your light on so no itchy trigger finger don"t think the pullbacks over yet

 

[timsk]

well, we clambered up to around 6750 this morning so hands up those who took their 500+ points and called it a day

Good trading Jon!
As expected, the combo of strong resistance at 6750 and the column of 13 bloo 'X's proved too bigger challenge for the index. The reversal (penultimate column of red 'O's on attached chart) has, in effect, created both a triple top at 6750 and, simultaneously, a 'high pole'. Traders fond of top and bottom fishing will have taken note and be waiting to go short. They didn't have to wait long. Wednesday's bull rally was short lived, lasting just one day and comprising a meagre 4 bloo 'X's on the chart. A poor effort on the part of the bulls. Breach of the 6600 level (horizontal red line on the chart) is both a double bottom sell signal for shorts and the point at which the bull / bear scales tip emphatically in favour of the bears. The P&F chart is now BEARISH. Bulls can be comforted by the long horizontal dotted red line at 6500 which should provide support. If it does, we may then have a period of rangebound activity akin to May through to July this year, where the index oscillated between support at 6500 and resistance at 6750. An additional point of interest is that there is a huge increase in volatility in recent months. The vertical green lines at the foot of the chart indicate new months and, as can be seen, they are spreading apart. If last week is anything to go by, in which three new columns were created on the chart, then this pattern looks set to continue. All of which means lots of opportunities for day traders and short term swing traders alike.
Tim.

 

[black bear]

Well I did get + 25 pts intra day

Hi tmski,

"My take is , well I hope we go right back into the top of the last range pretty quick and that high pole gives up fast to 6525/500 so I can get me long on for the old Christmas hamper. Some spiky day action testing the last range would be ideal" :lol

:





Hi All,

UPDATE: on above comment posted well 2 or 3 :arrowu: , and possible Low risk entry was available using intra day trading.

WHICH I MISSED BECAUSE I AM DAFT

That is if you don"t get carried away intra day trading, and forget again why your there Barjon will appreciate this Post I am sure.

see above and charts below.

possible Intra day entry (LOW RISK) to try and establish swing trade 22/10/07, target last weeks high, in line with long, medium term trend and short term trend

Me I was verrry verrrrry buzy closing out my short on re-test of low in the 15 min charts, what an assssssssssssssssssss hooooooooooooooooooooo :!: no Christmas hamper for me, donations great fully accepted and hope someone was on.

Blue = Last weeks High and Low
Purple = Open hours range

 

[black bear]

Timsk wheres my P&F chart

Friday update

Was feeling a bit better till I spotted :arrowu:

Timsk please put P&f chart up, no I won"t take a rash trade based on it, but it will remove my last post which is affecting my mood

then I will be right as nine pence

 

[Splitlink]

As such, my personal view is that reversal patterns such as poles are useful as a means for taking some or all profits, but are very dangerous tools to utilize for entering new positions. Just my view of course
Tim.

It seemed to me that the failed high (low) approach would be less painful, if things go wrong, but that, too, falls down in a trending market. Perhaps, the good, old, trendline is the safest, a break of which is, at least a warning signal of uncertainty and a need for watchfulness. I notice that you do not move your trendlines upwards to the next dip, though. Is there a rule for that? isn't there a case for moving the trendline up to the next dip as soon as possible, to avoid a potential profit loss?

Split

 

[timsk]

Perhaps, the good, old, trendline is the safest, a break of which is, at least a warning signal of uncertainty and a need for watchfulness. I notice that you do not move your trendlines upwards to the next dip, though. Is there a rule for that? isn't there a case for moving the trendline up to the next dip as soon as possible, to avoid a potential profit loss?

Hi Split,
The only trendlines on my P&F charts are the bullish support (blue) and bearish resistance (red) automatically generated by ShareScope. For anyone not familiar with them, this is how ShareScope describes them:-

45 degree support and resistance lines
The most important guides that can be applied to Point & Figure charts are the Bullish Support and Bearish Resistance lines. A share is bullish if it is trading above the Bullish Support line. A share is bearish if it is trading below the Bearish Resistance line.

A Bullish Support line starts at the first empty box below the base of a protruding column of Os (a buy signal) and continues at 45-degrees upwards until it is intersected by a descending column of Os. This latter event is classically regarded as a sell signal. Note that the line must be penetrated and not just touched.

A Bearish Resistance line starts at the first empty box above the top of a protruding column of Xs (a sell signal) and continues at 45-degrees downwards until it is intersected by a rising column of Xs. This latter event is classically regarded as a buy signal.

Support and resistance lines are only drawn if they last for 3 columns or more.

What I like about these is that they are mechanical, there's no fudging about where they are placed. Personally, with bar and candle charts, I've always struggled to draw trendlines in a consistent manner and now rely upon moving averages to to perform this task. However, there is absolutely no reason why trendlines can not be drawn manually on a P&F chart, just as they would be on any other kind of chart and as you demonstrate on the chart attached to your post. So, in answer to your question, yes, there is a strong case for moving the trendline up to the next dip if it works for you! As with everything in this game, horses for courses, one man's meat is another man's poison etc.
Tim.

 

[timsk]

Looking Bullish Again

Bulls can be comforted by the long horizontal dotted red line at 6500 which should provide support. If it does, we may then have a period of rangebound activity akin to May through to July this year, where the index oscillated between support at 6500 and resistance at 6750.

I think I placed the dotted red line on last week's chart too high at 6500. I've re-positioned it on this week's chart at 6400 (solid red horizontal line) which is at a much stronger area of support and, therefore, more significant if breached. It's been tested just once, with the failed double bottom sell signal on the 25th September.

This week, the breach of the short bloo horizontal line at 6550, coupled with the strong move up on Thursday and Friday which resulted in the breach of the bearish resistance line established at the 6750 highs - makes the chart BULLISH once again. However, while the trend is still very much up, but the 6750 ceiling looks like being a really tough nut for the bulls to crack.

delelbis, I hope you're now 'right as nine pence'.
Tim.

 

[black bear]

Thanks for asking


delelbis, I hope you're now 'right as nine pence'.
Tim.[/QUOTE]

High timsk,

Of course I am,

Just showing how easy to mix your apples and oranges and pears in this game that's all.

Is a good example of how easy to muck game plan up I think.

Did miss it for reason stated 25 pts short intra day short trade.

Did not go through from Top first in a rush and you think you remember where the big 3 are but you don"t, well I don"t that's for sure

ie: month week day & 4hr 1 hr 15 min, what a nana head Live and Learn again :!:

 

[barjon]

Hi guys,

Back in the fold after a sunshine break.

See you've been p&fing but I hope you found the 22/10 swing low and the subsequent entry around 6530 with a move back up to the resistance zone and another near 200 points if that was your target. Those still in with part of their position will probably be gone at break even today with their final portion, but should have banked a few bob.

Good trading

jon

 

[timsk]

Still Bullish - But Only Just

Back in the fold after a sunshine break.

In late October Jon - you must have gone long haul? Hope you had a good time. Mrs. timsk and I are off to Noo Yoik tomorrow for 5 days which is unlikely to include much sun bathing. Shopping, galleries and, most importantly, visits to the NYSE and Nasdaq.

Thursday's large fall looks especially ominous on a bar or candle chart, but I think that's due mainly to where it's occurred on the chart as opposed to the actual size of the move. Look back over the year and you'll see quite a few large down days. However, on the P&F chart the current move down isn't as large as the column of 11 red 'O's from Mid October and, moreover, price looks as if it may have found support at the 6500 level. Of greater significance, IMO, is the failure of the bulls to test the highs at 6750 for a 4th time. These lower highs and higher lows suggest the index is winding itself into an ever tightening coil. This would result in a triangle pattern and may be accompanied by a drop in volume. When news breaks - and there's sure to be some - there's likely to be a substantial move. Which way - up or down - is anyone's guess!

For the time being at least, the P&F chart remains BULLISH and would only switch to bearish if the short red horizontal line at the foot of the previous column of 3 red 'O's is breached. Should this happen, the index will find a wealth of support in the 6375 - 6425 zone. If it busts through that lot, it'll be time to sell everything, short everything and send cards of sympathy to LTBH investors.
Tim.

 

[barjon]

Well, now we're in a bit of a pickle . New swing low today , but with a low that breached the previous one which turns the trend back to down. Or does it? The apparently decisive rejection of that low may just make it an overshoot.

Safest way is to stand clear and wait for confirmation one way or the other. Alternatively, assume an overshoot and trade long via the last assumed swing low (last red candle) with entry around 6532.

All will unfold in time

good trading

jon

 

[Hoggums]

Well, now we're in a bit of a pickle . New swing low today , but with a low that breached the previous one which turns the trend back to down. Or does it? The apparently decisive rejection of that low may just make it an overshoot.

Safest way is to stand clear and wait for confirmation one way or the other. Alternatively, assume an overshoot and trade long via the last assumed swing low (last red candle) with entry around 6532.

All will unfold in time

good trading

jon

Hmm - it is very interesting indeed - however draw a trend line from the 2 lows in mid september and you'll see that todays low hit and then bounced off that trend line.

Also to be really bearish we've got totake out those ~5850 lows in August - a long way off that. Short term I really wouldn't like to make any predictions, other than a possible short rally the next few days.

 

[barjon]

Ah! Not a "decisive rejection" then, but an LSE computer failure with the real close (for what it's worth) at 6385.

We've been down to 6290 today so it looks like we'll have to take it that the swing trend has turned down. Need some confirmation in view of the LSE shenanigans though.

good trading

jon