The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

Point‐and‐Figure Charting

bullish support and bearish resistance Lines

Trendlines are also used in Point‐and‐Figure charting. The practitioner has a

choice of drawing either the ±45‐degree trendline or can opt to draw conven-

tional trendlines. The 45‐degree lines are somewhat unique to Point‐and‐Figure

charts due to the square nature of the plot. Unlike conventional trendlines, only

one point is required to draw a Point‐and‐Figure 45‐degree trendline. There are

four 45‐degree trendlines employed in Point‐and‐Figure charting, namely:

1. Bullish Support Line


2. Bearish Resistance Line


3. Bullish Resistance Line


4. Bearish Support Line

The main uptrend line is the bullish support line, while the main downtrend

line is the bearish resistance line. The bullish support line is drawn at a 45‐degree

angle upward from the space just below the lowest O of a column of Os. The bear-

ish resistance line is drawn at a 45‐degree angle downward from the space just

above the highest X of a column of Xs. Uptrending channels may be created by

combining the bullish support and bullish resistance lines, whereas downtrending

channels may be created by combining the bearish support and bearish resistance

lines. These lines are not traded as per any conventional trendline. Once a trend-

line is breached, the trigger for an entry must be based on a subsequent double top

or bottom violation. Therefore, a trendline breach merely represents a bullish or

bearish signal, and not a trigger in itself for entry. See Figure 15.39 for an illustra-

tion of these trendlines.

reversal of bullish and bearish signals

Assume that prices move to the upside, with each successive X exceeding the

previous X, and with each lowest O also exceeding the previous O. This would

Figure 15.38 A Basic Three‐Box Reversal Broadening Formation.