Cryptocurrency Point & Figure Trade Setups
Point & Figure is one of the oldest (if not the oldest) forms of technical analysis and is one of the purest forms of price action only charting. This style of charting gives clear and concise levels for traders to enter or exit.
Point and Figure Charts
Of all the different charts out there, I think one that looks the most foreign to new traders and technical analysts is the Point & Figure style of charting. The great analyst, trade and author, Jeremy Du Plessis, said that Point & Figure charts are unique to Technical Analysis because they don’t exist in any other field – and that’s very true. What’s also true is that we don’t know who actually invented this style of charting and that really doesn’t matter. It’s entirely probable that such a ‘common sense’ approach to charting and a logical method may have been developed by multiple people around the world who came to the same conclusion (like the invention of the wheel or using the sun to measure time with shadows). So what is a Point & Figure Chart? Well, it looks like this:
Now, for the new person, you are probably more confused by this chart that has just X’s and O’s on it than anything else you’ve looked at in Technical Analysis. Which is kind of funny in a way because this chart is devoid of any kind of ‘noise’: it’s just some columns of Xs and Os. But let’s break this down even further:
Let’s break down some terminology:
Boxes – A ‘box’ is a single X or O, but more importantly, a ‘box’ represents a unit of measurement. In this case, on Litecoin’s chart, each box represents $5 worth of movement. O’s are declining prices, X’s are rising prices.
Reversal Amount – This is probably the most confusing part for new folks: the reversal amount. I think the image below can better explain how a column of X’s and O’s is formed.
Point & Figure Crypto Entries
Now let’s get into some entry opportunities with our crypto markets. You will see how easy it is to identify things like double tops, triple bottoms, trendlines and all sorts of very easy to establish and identify value areas.
Litecoin is currently forming a bullish pennant. An aggressive entry would be when the next column of X’s forms and it breaks above that upper trendline of the triangle. However, this is would also create a double top from the last column of X’s. An aggressive entry at the break of the trendline would be to enter at $140, while a more conservative entry would be a break of the double top at $145.
Ethereum has finally caught up with the rest of the part and has made some excellent gains. It’s in the middle of the same corrective move that Bitcoin has met, but it was a very natural reaction to an extremely long lasting downtrend line. Ethereum briefly traded above it but has since dropped below. However, price is currently up against a prior resistance area that is now holding as support (280 – 290). If a new X prints above that trendline, then we would have an excellent entry opportunity to generate a new bull trend. That condition would occur when price reaches the $330 value.
And finally, we get to the big guy, Bitcoin. It had one helluva drop when Coinbase decided to hit the bed. But’s recovered nicely… so far. Now, I am crazy bullish on this entire market but I know we’re in a market condition where the pullback is coming and it should last for 30-60 days before resuming higher. But I also know that there’s a metric ton of momentum here and we could break the prior swing high without any issues. But I want to wait for the market to come to me. An aggressive entry at $13600 would occur right when a new X would print above the upper trendline. Personally, I’m waiting until that trendline is broken and price breaks above the prior swing high to print a new X right on $14,000.