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--- chart_analysis:pnf_charts:pnf_price_objectives [2019/09/07 00:28]
betseyp [Activating Price Objectives]
+++ chart_analysis:pnf_charts:pnf_price_objectives [2023/01/30 16:08] (current)
jayanthi
@@ Line 3: / Line 3: @@
 ===== Introduction =====
-// **Important:** P&F Price Objectives are upside and downside price targets that stem from a P&F buy or sell signal. These price objectives should not be used as the sole reason for buying or selling a security; they are just general guidelines on what to expect based on the strength of the initial price move. Some securities reach their price objective, but others reverse before doing so. A lot can change after a given signal. Chartists should continually monitor the technical situation for signs that validate or invalidate the Price Objective. //
+// **Important:** P&F Price Objectives are upside and downside price targets that stem from a P&F buy or sell signal. These price objectives should not be used as the sole reason for buying or selling a security; they are just general guidelines on what to expect based on the strength of the initial price move. The price objective represents the extreme of the range. Some securities reach their price objective, but others reverse before doing so. A lot can change after a given signal. Chartists should continually monitor the technical situation for signs that validate or invalidate the Price Objective. //
 StockCharts automates Point & Figure price objectives using the Breakout Method and the Reversal Method, both of which are based on the vertical length (height) of a Measure Column. The longer the Measure Column is, the higher or lower the price objective. Identification of this column depends on the method, Breakout or Reversal. This article will show chartists how to find the Measure Column, how to calculate the length of the price move and how to determine the Price Objective.
-Note that different scaling methods can affect the Price Objectives. Most of the examples below are with Traditional Scaling, which is a half point per box below 20, 1 point between 20 and 100, 2 points between 100 and 200, and 4 points between 200 and 400. Price objectives can change when using dynamic ATR scaling and percentage scaling. Chartists looking to calculate their own price objectives may wish to try "user-defined" scaling to ensure a uniform box size. This will make calculations and objectives much easier to ascertain. Also, keep in mind that these price objectives are not "hard levels". Instead, they are "soft areas" that chartists can use as a broad guideline.
+Note that different scaling methods can affect the Price Objectives. Most of the examples below are with Traditional Scaling, which is a half point per box below 20, 1 point between 20 and 100, 2 points between 100 and 200, and 4 points between 200 and 400. Price objectives can change when using dynamic ATR scaling and percentage scaling. Chartists looking to calculate their own price objectives may wish to try "user-defined" scaling to ensure a uniform box size. This will make calculations and objectives much easier to ascertain. Also, remember that these price objectives are not "hard levels". Instead, they are "soft areas" that chartists can use as a broad guideline. Another point to note is that the chart header shows the extreme levels of the range.
 ===== Basic P&F Signals =====
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 {{:chart_analysis:pnf_charts:pnf_price_objectives:pnfpob-02-ctxs-bobull.png|StockCharts.com Price Objectives - Chart 2}}
-The chart above shows Citrix (CTXS) with a Bullish Price Objective of 74, which can be seen in the upper left and on the right scale (green ovals). Just the fact that we see a Bullish Price Objective tells us that the active signal is a P&F buy signal. Now we can look for the most recent sell signal, which occurred in January (red arrow).
+The chart above shows Citrix (CTXS) with a Bullish Price Objective of 74, which can be seen in the upper left and on the right scale (green ovals). Just the fact that we see a Bullish Price Objective tells you that the active signal is a P&F buy signal. Now you can look for the most recent sell signal, which occurred in January (red arrow).
 Working to the right of this sell signal, the next buy signal triggered in February (red 2 on the breakout column). This is the column that reversed the P&F sell signal and it becomes the Measure Column. For height, the Measure Column is five boxes (X's) and each box is 1 (5 x 1 = 5). Alternatively, the high of the column is at 65 and the low is at 60 (65 - 60 = 5). The height is multiplied by the reversal (5 x 3 = 15) and this total is added to the low of the prior O-Column for a Bullish Price Objective (59 + 15 = 74). Notice that the Citrix example shows a fixed Measure Column because there was a three-box reversal to lock in column height. Despite two falling O-Columns and small declines, the buy signal and Bullish Price Objective remain in force until countered with a P&F sell signal.
-The Bullish Price Objective is tentative when the Measure Column is not yet fixed and subject to change. The chart below shows General Motors (GM) with a "tentative" Bullish Price Objective of 48 (upper left). Notice that this Price Objective is not on the actual P&F chart because it is off the scale. The Bullish Price Objective is tentative because the Measure Column is not yet fixed and still subject to change if prices extend higher. A move above 39 would warrant another X and increase column height, which would, in turn, increase the Bullish Price Objective. This column will not be fixed until there is a three-box reversal with an O-Column that fills three boxes to the downside. Such a move would not, however, negate the P&F buy signal and the Bullish Price Objective remains valid until a P&F sell signal.
+The Bullish Price Objective is tentative when the Measure Column is not yet fixed and subject to change. The chart below shows General Motors (GM) with a "tentative" Bullish Price Objective of 48 (upper left). This represents the extreme of the range. Notice that this Price Objective is not on the actual P&F chart because it is off the scale. The Bullish Price Objective is tentative because the Measure Column is not yet fixed and still subject to change if prices extend higher. A move above 39 would warrant another X and increase column height, which would, in turn, increase the Bullish Price Objective. This column will not be fixed until there is a three-box reversal with an O-Column that fills three boxes to the downside. Such a move would not, however, negate the P&F buy signal and the Bullish Price Objective remains valid until a P&F sell signal.
 {{:chart_analysis:pnf_charts:pnf_price_objectives:pnfpob-03-gm-bobulltent.png|StockCharts.com Price Objectives - Chart 3}}
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 There are four steps to finding a Bearish Price Objective with the Breakout Method. Before starting, make sure "Breakout" is selected as the Price Objective method and the active signal is a P&F sell signal, which means there will be a Bearish Price Objective visible in the upper left corner of the chart.
-First, working from right to left, find the most recent P&F buy signal. This allows us to find the column that reversed the P&F buy signal with a P&F sell signal.
+First, working from right to left, find the most recent P&F buy signal. This allows you to find the column that reversed the P&F buy signal with a P&F sell signal.
 Second, work to the right of this P&F buy signal and find the next P&F sell signal. The column that produces this P&F sell signal is important because it was strong enough to reverse the P&F buy signal. It is now the Measure Column. Keep in mind that this Measure Column might not be the one that produced the most recent P&F sell signal. It is simply the one that reversed the last P&F buy signal.
-Third, calculate the height of the Measure Column and multiply it by 2/3 of the box reversal amount. There are two methods to calculate column height. First, chartists can subtract the column high from the column low. Second, chartists can count the number of filled boxes and multiply by the box size. The column height is then multiplied by 2/3 of the box reversal amount, which is typically 3 (3-box reversal). Using 2/3 for bearish counts is advocated by A.W. Cohen, a pioneer in P&F charting, and Tom Dorsey, author of //[[https://store.stockcharts.com/products/point-figure-charting-the-essential-application-for-forecasting-and-tracking-market-prices-3rd-edition|Point & Figure Charting]]//.
+Third, calculate the height of the Measure Column and multiply it by 2/3 of the box reversal amount. There are two methods to calculate column height. First, you can subtract the column high from the column low. Second, you can count the number of filled boxes and multiply by the box size. Them multiply the column height by 2/3 of the box reversal amount, which is typically 3 (3-box reversal). Using 2/3 for bearish counts is advocated by A.W. Cohen, a pioneer in P&F charting, and Tom Dorsey, author of //[[https://store.stockcharts.com/products/point-figure-charting-the-essential-application-for-forecasting-and-tracking-market-prices-3rd-edition|Point & Figure Charting]]//.
 Fourth, subtract this total from the high of the column just before the Measure Column. Because the Measure Column forms with an O-Column that produced a P&F sell signal, the column immediately to the left will be an X-Column.

P&F Price Objectives: Breakout and Reversal Method

Differences