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Point & Go Figure

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Last night Minyan Leon asked me to look at some stocks that may be developing a "following," meaning stocks which are showing up on the screens of a number of market "followers." The idea is that stock ideas floating among a number of unrelated followers develop a "cause," or reason to move higher.

This is simply a verbal way of describing what a chart "trend" illustrates: accumulation by someone, or some people, which begins to show up in price data as demand begins to exceed supply, recognition of this fact, and consensus then building in a self-reinforcing loop until there is no one left to reinforce the demand and supply takes over.

I like to use the point & figure charts to falsify stock opinions and beliefs. In other words, if I come across an interesting analysis of an industry group or specific stock, I can quickly turn to a point & figure chart to see if there is anything actionable. So let's take a look at some point & figure charts on the stocks Leon mentioned last night.

All charts courtesy Dorsey, Wright & Associates.

Amazon.com Inc. (AMZN)

Apple Computer, Inc. (AAPL)

Helmerich & Payne, Inc. (HP)

Crude Oil Continuous (CL/)


What is interesting about the potential shakeout forming in Crude is the fact that on a long-term point & figure chart of Natural Gas, there is also a potential shakeout forming. First, I would not trade Crude or Natural Gas on a long-term point & figure chart, but I believe these long-term charts are very helpful in establishing a secular thesis, and certainly in falsifying one.

The Natural Gas long-term chart shows it could pull back to 8 and remain in a long-term uptrend. This would initiate the shakeout. The long-term price target based on a point & figure count from the breakout above 8 is 12.20 (not advice).

What would happen if the shakeouts in energy began?
Is consensus ready to embrace the perceived trend reversal?
Or is consensus still squarely in the long-term bull camp?
In my opinion, the most bullish technical scenario would be a shakeout pattern followed by the consensus opinion that the energy bull market has concluded.

Natural Gas Continuous (NG/)

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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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