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A point-and-figure chart shows filtered price movements of a stock over time and is used by technical analysts to determine price support and resistance levels for a given stock. Price movements on a point-and-figure chart are represented as either a rising column of Xs or a falling column of Os. Each column on a point-and-figure chart indicates an uptrend or a downtrend. New columns are added to the point-and-figure chart when the stock price changes direction by a pre-determined reversal amount. Technical analysts who use the point-and-figure chart method cite its ability to filter out insignificant price movements and remove the effects of time as reasons for preferring point-and-figure chart information to more traditional bar charts. In addition, a point-and-figure chart makes trend lines easy to recognize. |
