Wednesday, March 18, 2009

Point and Figure Charts Compounded with Narrow Range Bars (NRBs)

As mentioned in Toby Crabel's book, Day Trading with Short-Term Price Patterns and Opening Range Breakout, range contraction days usually are followed by a trend day. The commonly used range contraction days are NR4/ID, and NR7.

Yesterday, we had extremely low volatility on all three markets. Yen, after a NR7/ID on 3/16/09, formed a NR20. That was the narrowest range in a whole month (20 trading days). Euro had a NR20 two days ago (3/13/09). And yesterday's daily range was just 7pips more than the bar of 3/13/09, it's alright to deem it as another NR20. Pound was a NR20/ID.

So we had the most promising contraction pattern yesterday. Today would be reasonable to anticipate a trend day.

Euro took off at 8:00am and surpassed both highs of last two days. So that was a legit NR20/ID breakout setup. On hourly point and figure chart, euro broke out from a double top pattern at level of 3066, which worked as resistance in January three times.

Yen broke down at 8:00am. At 10:00am the downside move took the low of yesterday and formed a double bottom pattern at 97.75 on hourly point and figure chart.

Pound formed a downward channel on hourly chart, and took the low of NR20/ID in London session. That's a double bottom breakout at 3066 on point and figure chart. At 8:00am, pound jumped back and sit just above the low of NR20/ID.

The ultimate move was triggered by the 2:15pm event - Federal Funds Rate. Yen's breakdown stop right at the former swing low 95.65, with a daily range of 317pips, which was a WS7 day with 3.1 std over the average daily range (ADR). Pound jumped from the bottom of the NR20 and surpassed its top, which indicated the breakdown in London session was a bear trap. Pound ended with a 454pips daily range, and a WS7 with 2.5 std over ADR. Euro's daily range was the highest - a whopping 511pips, which was 5.0 std over ADR.

All these breakdowns and breakouts are clearly illustrated by point and figure charts. That's the beauty of simplicity.


Anonymous said...

I like your excel-based point&figure charts. If it is not something proprietary or exclusive, would you share the excel workbook used and explain how to feed data in it? Regards

sundeepgoyal@y a h o

kk said...

your excel p and f charts look reaaly cool. would be high;y delighted if u share them with me

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