Bitcoin Point and Figure Entry unchanged
Broad moves over the past two weeks have not affected the entry based on a Point and Figure chart.
Bitcoin’s (BTC) Point and Figure Chart
One of the chart styles that I use in my trading is the Point & Figure chart style. It is quickly taking up the great majority of my trading charts. I do not have as much time as I used to for actively trading during the day as I have taken on several teaching roles – so I have switch a good amount of my trading to the Point & Figure style. For those of you unfamiliar with this chart style, it is one of the oldest technical chart forms in history – possibly the first of its kind. Kirkpatrick and Dahlquist called Point and Figure analysis, technical analyst purists. And this does make sense in many ways. Point and Figure is a price only chart like Renko, Kagi (Gann Swing Charts), and Line Breaks – but that is where the similarity ends. Point and figure records price only, no volume or time is used. The theory behind a price only chart is that volume is not important if it didn’t affect price. To borrow from the words of Kirkpatrick and Dahlquist, time and price are anecdotal to price because the ultimate result of all information is price. If you think about it, if a ton of volume is traded during a particular time period, but price doesn’t move, then the volume is pointless. Personally, my favorite thing about Point and Figure is that it’s a very stress-free form of analysis. The constant whipsaws and noise are relatively avoided with this chart style. But it is also a powerful analytical and trading tool.
On a Point & Figure chart, price is always in an uptrend or a downtrend. And because of the nature of this chart style, the trend can change fairly frequently. Bitcoin was trading in an uptrend until it broke below the bullish trendline at the $9400 value area. While we don’t measure or consider time on a Point & Figure chart, we can nonetheless gauge the length of time from one column to the next. The most recent column of Os has initially formed a month ago on September 9th. That column lasted until the new and current column of Xs was formed on September 30th. That most recent column of Os is a fairly substantial column equaling a -$3000 drop. That drop is tied for the largest drop back in June 2019. Much of the analysis done in Point and Figure is unambiguous, but there does remain some subjective components. The -$3000 column of Os could be considered a pole pattern. I have considered that column a pole pattern and have a series of buy stops right on an above the $9400 value area. The rules of an entry on a pole trade involve entering when the next box exceeds the 50% range of the column.
I do have a tight stop on that entry. Entry at $9400 puts price close to the prior bull trend line and could face some natural rejection at that level. Price would also be very near the 10-column moving average – increasing the chances of being rejected higher. I have recently added a 10-column moving average to better filter entries, following the ideas in DuPlessi’s work. With the moving average comes some additional rules. To go long, the multi-tops must be above the moving average. To go short, the multi-bottoms must be below the moving average. But this is Bitcoin, and a return back to the breakdown zone could generate a spike higher.