Point & Figure Charting October 5, 2004

Point & Figure Charting by Thomas J. Dorsey

If you’re confused by candlesticks, or baffled by Bollinger Bands, then maybe Point & Figure charts are for you. Simple to construct and simple to understand, P&F charts draw clear pictures of a security’s price movement, independent of time. When the price moves, the chart moves – when the price doesn’t move, neither does the chart!

In Point & Figure Charting, Tom Dorsey presents all of the basics behind the construction and interpretation of point and figure charts. After describing how P&F charts are created, he helps to interpret the picture of market supply and demand they paint, the patterns that form on the charts and the various buy and sell signals they present. He also shows how P&F charts can be used in many areas of market study, and emphasizes the importance of examining a stock’s relative strength and market sector analysis.

But perhaps one of the most interesting topics covered in the book is the Bullish Percent concept: a Bullish Percent Index provides an indication of strength or weakness in a particular market or sector based on the percentage of stocks that are on P&F “buy” signals. Dorsey demonstrates with a few tables how the Bullish Percent Indices he tracks gave him fair warning of the bursting of the stock market bubble in the spring of 2000.

To many, Point & Figure charts provide a simpler, clearer picture of market action than standard line or bar charts. This book will help you to understand P&F charts and how you can make them work for you.

Secrets for Profiting in Bull and Bear Markets October 4, 2004

Stan Weinstein’s Secrets for Profiting in Bull and Bear Markets by Stan Weinstein

Plain and simple: Get your hands on this book and read it.

If there is a better book at helping the individual investor interpret stock charts and use them to make better investment decisions, BMB has not yet read it. Mr. Weinstein introduces only the very basic concepts of technical analysis, so he doesn’t confuse you with fancy indicators and complicated formulas. He uses weekly charts to demonstrate how to break stock price movement down into 4 stages and how to recognize when a stock moves from one stage to the next. He then shows, based on these stage transitions, when to buy or sell a stock, and describes how to place trailing stops to limit your losses and protect your profits (BMB strongly recommends the use of stop orders).

In BMB’s humble opinion, these techniques make a great deal of sense for the individual investor. Using weekly charts means you don’t necessarily have to be going over the charts every single day, and it means you don’t have to be a day-trader — you identify and trade on longer term trends rather than short-term movements.

One note on this book: the hardcover edition was published in 1988 (no longer in print), and the paperback in 1992. So you may find that the charts seem a bit dated – but the ideas are not. Read the book, than scan a few weekly charts from the fall of 2002 through the spring of 2003. You’ll see at a glance how this book could have helped you!

(BMB would like to thank Gary Kaltbaum for recommending this book on his radio show.)