Point and Figure Charts: Trend Reversals

Trend Reversal Patterns

Point and Figure Charts: Loss of Momentum

After an up-trend, marginal new highs on the Point and Figure chart (especially where accompanied by equal or lower lows) indicate a loss of momentum and may evolve into a stage 3 top.

Here is a Point and Figure chart for Ford Motor Company. Note the marginal new highs at [1] and [2] before a strong trend reversal.

Point and Figure Charts: Marginal Higher Lows

In a down-trend, a series of higher lows indicate accumulation. Equal or rising highs are a further bullish sign.
Enter on completion of the third higher low: the start of the fourth column of Xs.

An inverse of the pattern in an up-trend, where you have several marginal lower highs, would be a strong bear signal.

Colin Twiggs

Author: Colin Twiggs is a former investment banker with over 30 years experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary newsletter.

Colin also writes The Patient Investor newsletter which focuses on the global economic outlook and key macro trends.

In addition, he founded PVT Capital (AFSL No. 546090) which offers investment strategy and advice to wholesale clients.