Insider TA: P&F Support & Resistance Lines
After enabling Point & Figure charting and selecting the beginning
reference point, you can add Support
& Resistance trend lines. Because Point & Figure charts ignore
the time factor and focus exclusively on price movement, they can be helpful
in marking significant price formations. Bullish or bearish activity is
implied when these formation levels are penetrated, reflecting how seller
emotions (fear) and buyer emotions (greed) are competing
with each another.
- Support lines help define the lower level that a stock's
price tends to bounce against. It reflects the price level that induces
buyers to enter the market, an action that tends to keep the stock's
price from falling any lower. Support lines can generally be identified
whenever two or more columns of O's have equal bottoms.
- Conversely, resistance lines reflect the upper level
that a stock price flirts with. It is the price point that induces stock
holders to typically sell, an action that prevents the stock from rising
any higher. They are identified when two or more columns of X's have
equal tops.
In addition to purely horizontal orientations, the tops and bottoms of
columns may also be observed to appear at 45 degree angles. Mapping these
patterns are more commonly referred to as trend lines, although we tend
to refer to them as support & resistance lines as well. Interestingly,
this 45-degree behavior is prevalent with many stocks, which makes Point
& Figure charts so fascinating!
Regardless of whether lines be horizontal or angled, when a column of
upward bound X's penetrates a resistance line, or downward O's penetrates
a support line, it may indicate a signficant price movement is about to
occur.
Adding a line:
Referring to steps marked 1, 2, and 3 in the following figure, to add
a line all you have to do is left-click the mouse button anywhere in the
Point & Figure graph, and then drag the mouse in the desired direction.
Depending on where you're dragging the mouse, the line will "snap" to
either zero degrees (horizontal) or 45 degree up or down. These
three orientations are the conventional Point & Figure methods for
illustrating support and resistance trend levels.
Moving or Repositioning a line:
Referring to step 4 below, changing an existing line is achieved by dragging
the "handles" at either endpoint:
- The square handle will move the line as one rigid entity
- The circular handle will let you stretch, compress, or change the
line's orientation. The other endpoint will remain fixed at it's current
location.
Deleting a line:
To remove a Support & Resistance line, right click either of it's
endpoint handles. A menu will popup, allowing you to select the
first option titled "Delete this line". You will also see a second
option that lets you delete all lines instantly. Refer to step 5
below.
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