The Definitive Guide to Point and Figure: A Comprehensive Guide to the Theory and Practical Use of the Point and Figure Charting Method

By Jeremy du Plessis

Quick Summary

The most comprehensive modern treatment of Point and Figure charting by Jeremy du Plessis, covering the method's history, construction rules for 1-box and 3-box reversal charts, pattern analysis, counting techniques for price targets, relative strength analysis using Point and Figure, and practical applications for stocks, commodities, and indices.

Executive Summary

Jeremy du Plessis, a Fellow of the Society of Technical Analysts and a leading authority on Point and Figure (P&F) charting, presents the definitive modern reference on this classic charting methodology. Now in its second edition, the book covers every aspect of Point and Figure analysis from first principles through advanced applications. P&F charts are unique among technical analysis tools because they filter out time entirely, focusing exclusively on price movement and reversal patterns. This makes them particularly valuable for identifying trends, support/resistance levels, and price targets without the noise of time-based charts.

Core Thesis

Point and Figure charting, one of the oldest forms of technical analysis, remains one of the most powerful precisely because of its unique characteristics: it eliminates time from the analysis, focuses purely on significant price movements, and provides objective rules for pattern identification and price target calculation. The method's simplicity -- using only Xs (up moves) and Os (down moves) -- belies its analytical depth.

Key Content

History and Construction

Traces P&F charting from its origins in the late 19th century through its modern evolution. Detailed construction rules for both 1-box reversal charts (which record every price reversal) and 3-box reversal charts (which filter out minor reversals, focusing on significant moves). The "filling and emptying glasses" metaphor elegantly explains how P&F charts capture supply and demand dynamics.

Pattern Analysis

Comprehensive coverage of P&F buy and sell signals: double top/bottom, triple top/bottom, catapult formations, broadening formations, and complex patterns. Each pattern is defined with objective rules that eliminate the subjectivity common to bar/candlestick pattern analysis.

Counting Techniques

Both horizontal and vertical counting methods for calculating price targets from P&F patterns. These techniques provide objective, measurable price projections based on the width or height of completed patterns.

Relative Strength with Point and Figure

Application of P&F methodology to relative strength analysis, allowing traders to identify which stocks or sectors are outperforming or underperforming their benchmarks.

Box Size and Reversal Size

Detailed discussion of how different box sizes and reversal sizes change the sensitivity of the chart and the types of signals generated. Guidelines for selecting appropriate parameters for different instruments and time horizons.

Practical Applications

Real-world examples across stocks, indices, and commodities, demonstrating how P&F analysis integrates with other technical and fundamental approaches.

Key Concepts and Frameworks

1. Price Without Time -- The fundamental P&F principle that significant price movement, not time, drives analysis.
2. Supply and Demand Visualization -- Xs represent demand (buyers in control), Os represent supply (sellers in control).
3. Objective Pattern Rules -- Unlike most chart patterns, P&F patterns have unambiguous, rule-based definitions.
4. Horizontal and Vertical Counts -- Two complementary methods for calculating price targets from completed patterns.
5. Variable Sensitivity -- The ability to adjust box size and reversal size to tune the chart for different analytical purposes.

Critical Assessment

Strengths

• Unquestionably the most thorough modern treatment of Point and Figure charting
• Clear, systematic presentation from basic construction to advanced applications
• Objective rules that minimize the subjectivity plaguing most technical analysis methods
• Excellent illustrations and real-world examples

Limitations

• P&F charting is less widely used than bar/candlestick methods, limiting community support and tool availability
• The elimination of time, while analytically useful, means P&F charts cannot capture time-dependent patterns
• Some may find the methodology overly mechanical
• The comprehensive coverage makes the book quite long; casual readers may be overwhelmed

Conclusion

Du Plessis has produced the authoritative reference on Point and Figure charting for the modern era. For technical analysts seeking an objective, noise-filtering approach to price analysis and target setting, this book provides everything needed to master the methodology. Its greatest strength is bringing academic rigor to a charting method that has often been treated superficially in the broader technical analysis literature.