Section 4 - Chapter 4 - Point-and-Figure Patterns

Section 4 - Chapter 4 - Point-and-Figure Patterns - Presented by Rohan Sharma - The CMT Coach - Chartered Market Technician CMT Level 1 Study Material - CMT Level 1 Chapter Wise Short Notes - CMT Level 1 Course Content - CMT Level 1 2025 Exam Syllabus Visit Site : www.learn.ptaindia.com and www.ptaindia.com

1. Chapter 4 – Point & Figure Patterns Section 4 – Chart Pattern Analysis Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

2. Agenda Identify complex point-and-figure chart patterns Calculate price projections using vertical and horizontal counts Summarize additional uses for point-and-figure charts This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

3. Basics of Point & Figure Patterns Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

4. Point & Figure (P&F) Charts 1. Overview • A Point & Figure (P&F) chart is a price action-based charting technique that filters out insignificant price movements (noise) and focuses on trends. • Unlike candlestick or bar charts, P&F ignores time and only reacts to price changes . 2. Construction of P&F Charts ✅ X Columns (Rising Prices) → Represent upward price movements (bullish). ✅ O Columns (Falling Prices) → Represent downward price movements (bearish). ✅ Box Size → The minimum price change required to add a new X or O. ✅ Reversal Size → The price move required to shift from an X column to an O column (or vice versa ). Common values: 1-box, 3-box, or 5-box reversal. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

5. Point & Figure (P&F) Charts 3. Basic P&F Rules • A new X is added when price moves up by at least 1 box size. • A new O is added when price moves down by at least 1 box size. • A reversal occurs only when price moves opposite by at least the reversal size. • No new entries are made unless price moves significantly in either direction . 4. Trend Identification Bullish Signal → When a column of Xs exceeds the previous high. Bearish Signal → When a column of Os falls below the previous low. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

6. Point & Figure (P&F) Charts 5 . Common P&F Chart Settings • Traditional Box Size: 1% of stock price or fixed amounts (e.g., $1 per box). • ATR-Based Box Size: Uses Average True Range (ATR) for dynamic sizing. • Reversal Sizes: o 1-box reversal: No filtering, very noisy. o 3-box reversal: Most common, filters out minor price movements. o 5-box reversal: For long-term trends, removes more noise . 6. Support & Resistance in P&F Charts • Horizontal clusters of Xs or Os act as strong support/resistance zones. • Breakouts above/below these zones confirm strong trends . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

7. Point & Figure (P&F) Charts 7. Common P&F Patterns 🔹 Double Top Breakout → A bullish signal where a new X column surpasses the previous X high. 🔹 Double Bottom Breakdown → A bearish signal where a new O column drops below the previous O low. 🔹 Triple Top & Bottom → Stronger versions of the above. 🔹 Bullish/Bearish Catapult → A consolidation pattern followed by a breakout. 🔹 Bullish/Bearish Triangle → Indicates potential breakout in either direction. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

8. Point & Figure (P&F) Charts 8. Advantages of P&F Charts Removes noise → Focuses only on significant price moves. Easy to spot trends → No time-based distractions. Strong support/resistance levels → Clearly defined breakouts. Good for long-term investors & traders → Filters out small fluctuations . 9. Limitations of P&F Charts Not useful for short-term trading due to lack of time element. May lag during rapid market movements since reversals require significant price change. Different settings can give different results (box size & reversal size impact signals ). This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

9. Point & Figure (P&F) Charts 10. Best Uses of P&F Charts 📌 Trend Trading: Identifying long-term bullish or bearish trends. 📌 Breakout Confirmation: Verifying strong breakouts and avoiding fake outs . 📌 Support/Resistance Analysis: Clearly defines price levels. 📌 Position Sizing & Risk Management: Helps set stop-loss levels . Quick P&F Settings Guide This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Asset Type Box Size Reversal Size Stocks (Daily) 1% of price or $1 3-box reversal Forex 20-50 pips 3-box reversal Cryptos 2-5% of price 3-box reversal Commodities ATR-based or fixed 3-box or 5-box reversal

10. Triangle Chart Patterns in Point & Figure (P&F) Trading Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

11. Triangle Chart Patterns Key Takeaways • Triangle patterns indicate price compression and potential breakouts. • They can form as ascending, descending, or symmetrical triangles. • Breakouts provide strong directional signals but require confirmation. • A failed breakout can lead to a reversal or trap traders. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

12. Triangle Chart Patterns This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

13. Triangle Chart Patterns This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Pattern Interpretation Trading Strategy Ascending Triangle Higher lows with resistance at a fixed level; bullish breakout likely. Buy after breakout above resistance with volume confirmation. Descending Triangle Lower highs with support at a fixed level; bearish breakout likely. Sell after breakdown below support with confirmation. Symmetrical Triangle Converging highs and lows; breakout can go in either direction. Trade in the breakout direction, setting stop-loss inside the pattern. False Breakout Price briefly breaks out but reverses inside the pattern. Avoid early entries; wait for confirmation.

14. Trend line Breakout in Point & Figure (P&F) Trading Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

15. Trend line Breakout Key Takeaways ✅ Trendline breakouts signal a shift in market direction—either a bullish or bearish breakout. ✅ The breakout must be confirmed by price action (at least 3 Xs or Os beyond the trendline ). ✅ Trendlines in P&F charts are diagonal and provide clear support and resistance levels. ✅ Works well for both continuation and reversal trades. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

16. Trend line Breakout This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

17. Trend line Breakout This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Pattern Interpretation Trading Strategy Bullish Trendline Breakout Price breaks above a long-term downtrend line. Buy once breakout is confirmed with 3 Xs. Bearish Trendline Breakdown Price falls below an upward trendline . Sell after breakdown confirmation with 3 Os. Retest of Broken Trendline Price pulls back to the trendline before continuing. Enter on the successful retest for stronger confirmation. False Breakout Price breaks out but reverses back inside. Avoid early entries; wait for confirmation.

18. Signal Reverse Patterns in Point & Figure (P&F) Trading Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

19. Signal Reverse Patterns in Point & Figure (P&F) Trading This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

20. Signal Reverse Patterns in Point & Figure (P&F) Trading Key Takeaways ✅ Signal Reverse Patterns indicate a sudden change in market direction. ✅ They often appear after a strong trend, signaling a possible reversal. ✅ These patterns trap traders who expect continuation but get caught on the wrong side. ✅ Confirmation with at least 3 Xs (bullish reversal) or 3 Os (bearish reversal) is crucial. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

21. Point & Figure Price Projection Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

22. Vertical Count Price Projection Point & Figure Charts 📌 Key Facts on Vertical Count Price Projection 1. What is the Vertical Count Method? • A trend-based price projection technique in P&F charting. • Used to estimate potential price targets based on the size of the initial move in a new trend. • Helps determine how far a trend may extend after a breakout . 2. Key Components • Column of Xs or Os : The first strong move in a trend. • Box Size: The price movement required to form each X or O. • Reversal Factor: The setting for how many boxes constitute a column reversal (typically 3). • Breakout Level: The price at which the pattern confirms a breakout . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

23. Vertical Count Price Projection Point & Figure Charts 📌 Key Facts on Vertical Count Price Projection 3. Vertical Count Projection Formula • Bullish Target: Add projection to breakout level. • Bearish Target: Subtract projection from breakout level . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

24. Vertical Count Price Projection Point & Figure Charts 4. Steps to Calculate Vertical Count Projection ✅ For a Bullish Target: 1. Identify the first column of Xs that starts a new uptrend. 2. Count the number of Xs in this column. 3. Multiply by Box Size and Reversal Factor. 4. Add the result to the breakout price (where the price exceeded prior resistance). ✅ For a Bearish Target: 1. Identify the first column of Os in a new downtrend. 2. Count the number of Os in this column. 3. Multiply by Box Size and Reversal Factor. 4. Subtract the result from the breakdown price (where price fell below prior support). This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

25. Vertical Count Price Projection Point & Figure Charts 🔹 Formula Breakdown This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Component Description Box Count Total number of Xs or Os in the initial column of the trend Box Size The price change represented by one X or O Reversal Factor The number of boxes required to reverse a trend (usually 3) Breakout Level The price level confirming the trend direction 🔹 Example Calculation (Bullish Trend) Box Size: $2 Reversal Factor: 3 Column Count: 10 Xs Breakout Level: $50 Price Target Calculation: 50+(10×2×3)=50+60=$110

26. Vertical Count Price Projection Point & Figure Charts This Content is Copyright Reserved Rights Copyright 2025@PTAIndia 🔹 Example Calculation (Bullish Trend) Box Size: $2 Reversal Factor: 3 Column Count: 10 Xs Breakout Level: $50 Price Target Calculation: 50+(10×2×3)=50+60=$110 🔹 Example Calculation (Bearish Trend) Box Size: $1 Reversal Factor: 3 Column Count: 8 Os Breakdown Level: $40 Price Target Calculation: 40−(8×1×3)=40−24=$16

27. Vertical Count Price Projection Point & Figure Charts ⚡ Key Takeaways & Pro Tips ✔ The longer the initial column, the bigger the price projection. ✔ Works best in strong trends with clear breakouts. ✔ Confirm projections with support, resistance, and volume analysis. ✔ Use larger box sizes for long-term projections and smaller for short-term. ✔ Always check multiple timeframes for confluence. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

28. Horizontal Count Price Projection Point & Figure (P&F) Trading Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

29. Horizontal Count Price Projection Point & Figure Charts 1 . What is the Horizontal Count Method? • A range-based price projection technique in P&F charting. • Used to estimate potential price targets based on the width of a consolidation or base before a breakout. • Helps determine how far price might move after breaking out of a trading range. 2. Key Components • Base Formation: The sideways consolidation before a breakout. • Column Count: The total number of columns in the base. • Box Size: The price movement required to form each X or O. • Breakout Level: The price level at which the breakout is confirmed. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

30. Horizontal Count Price Projection Point & Figure Charts This Content is Copyright Reserved Rights Copyright 2025@PTAIndia 3. Horizontal Count Projection Formula • Bullish Target: Add projection to the breakout level. • Bearish Target: Subtract projection from the breakdown level. 4. Steps to Calculate Horizontal Count Projection ✅ For a Bullish Target: Identify a sideways consolidation (trading range) before the breakout. Count the number of columns in the base (from leftmost to rightmost). Multiply by Box Size . Add the result to the breakout price (the price that confirms an upward breakout ).

31. Horizontal Count Price Projection Point & Figure Charts This Content is Copyright Reserved Rights Copyright 2025@PTAIndia 4. Steps to Calculate Horizontal Count Projection ✅ For a Bearish Target: Identify a sideways base before a downward breakout. Count the number of columns in the base. Multiply by Box Size . Subtract the result from the breakdown price (the price that confirms a downward breakout).

32. Horizontal Count Price Projection Point & Figure Charts This Content is Copyright Reserved Rights Copyright 2025@PTAIndia 🔹 Formula Breakdown Component Description Column Count Number of columns in the consolidation base Box Size The price change represented by one X or O Breakout Level The price level confirming the breakout Projection Method Add for bullish, subtract for bearish ⚡ Key Takeaways & Pro Tips ✔ Best used for breakouts from a trading range or accumulation/distribution zone. ✔ Larger bases result in larger price projections. ✔ Horizontal count targets work best when confirmed by trendlines and volume analysis. ✔ Check multiple timeframes to validate projections. ✔ Use stop-loss levels near the breakout point to manage risk.

33. Chapter 1 – Moving Averages Next Section 5 – Technical Indicators Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia