Education & Information
Buy Signals
Point and figure charts create basic buy and sell signals. A buy signal is one in which a column of Xs exceeds a previous column of Xs indicating the demand for that stock is gaining strength. A buy signal in and of itself is not enough information to necessarily buy the stock. Other considerations need to be made, such as the over all market condition, the industry sector condition, major trend for the stock, relative strength for the stock, etc… If all of these considerations are positive, then a buy signal on the point & figure chart should be acted on.
Buy signals take the form of many patterns. The basic and most common is the double top. Other buy signals are an extension of the double top. What make them different are the patterns that are formed prior to the buy signal. Below are some of the more important buy signal patterns: