I’ve never really gone over Point and Figure charts much, but I think today is a good day to do that. Point & Figure charts are an old, but powerful form of technical analysis. Easily and readily identify buy and sell zones.

 

Crypto Point & Figure Charts

Point and Figure charts are a form of chart analysis that does not use volume or time – just price. Whereas American Bar Charts and Japanese Candlesticks have a time element per bar or candlestick, Point and Figure charts do not. In that respect, they are very similar to Renko charts, Gann Swing charts or Line Break charts. Price action is the only factor that matters. It has been said that people who use only Point and Figure charts are about as ‘purist’ as a price action trader as you can get because all you are ever concerned about is price. What this means is that a ‘box’ (X or an O) or a series of boxes could form on a chart within minutes, or it could remain there for a week (which would represent a tight trading range using candlesticks).

                Bitcoin’s chart shows an interesting zone. There is a very clear triangle pattern on the chart, which looks more like a bearish pennant. In fact, the same continuation patterns that we see on candlesticks from big moves (pennants and flags) are also applicable on Point and Figure charts. One of the benefits of these charts is that we get to see a clear level of where to go long and where to go short. For Bitcoin, those price levels are when we get a clear break of not just the symmetrical triangle, but also a move above the prior high and/or low. A long position is generated when price returns to the 4400 value area whereas a short trade is generated at the 3200 value area.

 

 

Ethereum shows a similar scenario. We see another triangle form on this chart. Triangles in Point and Figure charts are just a normal part of the chart progression and analysis. And really any form of technical analysis, triangles are the geometric pattern in which markets move. We can see that on this chart for Ethereum the zone to short is in the 110-value area. The reason for this is because there is a double-bottom formed at 120 (two ‘O’s), so we always take the entry one box below that double-bottom. Similarly, the long condition is fulfilled when price reaches 160, which is one box above the double-top at 150. When I look at Ethereum’s char though, it looks ugly. The current short pattern looks like it is ready to just collapse lower after breaking down out of that triangle. And the bias for any bullish momentum seems very difficult to attain. In order to get to the 160-value area, we’d need to retrace the entire price action move from November 14th, 2018 to today – which is a good amount of bullish pressure against a very bearish market. The path of least resistance here remains lower… according to this chart.