THE HAndbook oF TEcHnIcAl AnAlysIssince this is a three‐box reversal chart, no reversal box is plotted until prices fall to
at least $25 − $3 = $22. Price eventually declines to $22 and three boxes are finally
plotted in the next column, filling the $24, $23, and $22 spaces with falling Os.
Price then reverses back to the upside, and no box is plotted unless prices reach
$22 + $3 = $25. Prices do not reach $25 and therefore no new reversal boxes are
plotted. Price finally falls to back down from $24 to $20, and two new continua-
tion boxes are plotted at $21 and $20, as seen in column 2. Finally, price reverses
again to the upside, where three new reversal boxes are plotted once price reaches
$20 + $3 = $23, as seen in column 3. Prices continue to rise from $24 to $25,
where two new continuation boxes are plotted as a column of rising Xs.
We now observe that it only took three columns to plot the same price path
using a three‐box reversal chart, instead of eight columns as seen on the one‐box
reversal chart, or five columns on the two‐box reversal chart. Therefore the larger
the reversal size, the less price action is revealed on the charts, making the charts
less sensitive. Larger box sizes and reversal sizes correspond to a longer horizon
outlook. It is akin to switching to a higher timeframe in conventional charting.
annotating time in point‐and‐Figure Charts
We may incorporate an element of time into the charts by marking the hour, day,
month, or year directly into a box. January to September months are usually de-
noted by the numbers 1 through 9, while October to December are denoted by the
letters A to C. This is done to avoid the annotation of double digits with the boxes.
Occasionally certain months may be missing due to non‐activity. See Figure 15.6.
Figure 15.6 Annotating Time on a Point‐and‐Figure Chart of Dell Inc.
Courtesy of Stockcharts.com