Point and Figure Charting

If you're looking for an investment approach that has stood the test of time—during both bull and bear markets—and is easy enough to learn, whether you're an expert or aspiring investor, then Point and Figure Charting, Fourth Edition is the book for you. Filled with in-depth insights and expert advice, this practical guide will help you grow your assets in any market.

In this reliable resource, the world's top point and figure charting expert, Tom Dorsey returns to explain how traders and investors alike can use this classic technique—borne out of the irrefutable laws of supply and demand—to identify and capitalize on market trends.

• Describes, step-by-step, how to create, maintain, and interpret your own point and figure charts with regard to markets, sectors, and individual securities
• Explains how to use other indicators, including moving averages, advance-decline lines, and relative strength to augment point and figure analysis
• Reveals how to use this approach to track and forecast market prices and develop an overall investment strategy
• Skillfully explains how to use point and figure analysis to evaluate the strength of international markets and rotate exposure from country to country

Today's investment arena is filled with a variety of strategies that never seem to deliver on what they promise. But there is one approach to investment analysis that has proven itself in all types of markets, and it's found right here in Point and Figure Charting, Fourth Edition.

Acknowledgments vii

Part I Learn the Point and Figure Methodology

Chapter 1 Introduction 3

Chapter 2 Point and Figure Fundamentals 29

Chapter 3 Chart Patterns 61

Chapter 4 Foundations of Relative Strength 105

Chapter 5 Advanced Relative Strength Concepts 145

Chapter 6 Primary Market Indicators for Gauging Risk 183

Chapter 7 Secondary Market Indicators 223

Chapter 8 Sector Rotation Tools 247

Part II The Point and Figure Methodology—A Complete Analysis Tool

Chapter 9 Fixed-Income Indicators 275

Chapter 10 Utilizing the Exchange-Traded Fund Market 291

Chapter 11 Evaluating the Commodity Market for Opportunities 319

Chapter 12 Trading Options Using Point and Figure 349

Part III Apply the Point and Figure Methodology to Your Investment Process

Chapter 13 Portfolio Construction and Management 369

About the Web Site 379

Index 381

THOMAS J. DORSEY is cofounder and President of Dorsey, Wright & Associates, LLC, a registered investment advisory firm that specializes in research and investable products based on the Point and Figure method of technical analysis. Formerly a senior vice president and director of Options Strategies with Wheat First Securities, and a stockbroker with Merrill Lynch, Dorsey has become the industry's foremost expert in Point and Figure Charting and teaches this method worldwide. He has appeared on mainstream financial media including Fox News's Cavuto on Business and received the Distinguished Speaker Award from the Wharton School of Finance Securities Industry Association. Mr. Dorsey is also the author of three previous editions of Point and Figure Charting and Commodity Strategies: High-Profit Techniques for Investors and Traders, all published by Wiley.

SARA GIEGERICH is Corporate Counsel to Dorsey, Wright & Associates. Ms. Giegerich began her current role in September of 2011; however, she has been with Dorsey Wright for nearly a decade, having started as an intern in high school. She worked for the company throughout her education at the University of Virginia and the University of Georgia School of Law. Ms. Giegerich was instrumental as an analyst, project manager, and editor for every facet of the fourth edition of Point and Figure Charting.

The Point and Figure method of investment analysis is not new by any stretch of the imagination. While little has changed in terms of its basic principles over the years, there are new and interesting ways of implementing this proven method—especially with the help of today's rapidly evolving computing technology.

Nobody understands this better than top Point and Figure Charting expert Tom Dorsey. Now, in the fourth edition of Point and Figure Charting, he returns to explain how traders and investors alike can use this classic technique—borne out of the irrefutable law of supply and demand—to identify and capitalize on market trends.

Within these pages, Dorsey offers valuable insights on establishing an "operating system" mindset—a belief in your method of analysis that you understand and embrace wholeheartedly—using the Point and Figure method. This will help carry you through your investment endeavors. Along the way, he provides step-by-step guidance on how to create, maintain, and interpret your own Point and Figure charts with regard to markets, sectors, and individual securities. He also explains how to use these findings to effectively track and forecast market prices and develop an overall investment strategy.

Divided into three comprehensive parts, Point and Figure Charting, Fourth Edition provides you with the insights to excel in many different markets, and under various conditions. Through a thorough discussion of everything from recognizing reliable chart patterns and the adaptability of Relative Strength (RS) to primary/secondary market indicators and using options as a risk management tool, this practical guide will allow you to make more of your time in today's markets by answering such important questions as: Is the market in a mode to support higher prices? Did you search the right sector? Which asset classes are in favor? And what countries are the best places to invest?

This book also comes with a companion website. It brings the concepts covered to life with additional examples and discussions, as well as exercises and tests to refine your skills. In using this interactive resource, you will have an important technical analysis tool to enhance your investments and portfolio performance.

Many people have forgotten or ignored the fact that having a logical, organized, well-founded method of investing in the markets is the only way to achieve success. So if you're looking for an investment approach that has stood the test of time—during both bull and bear markets—and is easy enough to learn, whether you're eighteen or eighty, then Point and Figure Charting, Fourth Edition is the book for you.