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Midday Market Update, Wednesday, 6/13/2001 - 1:30 pm ET

Market Commentary

Aftermarket Technology Point and Figure Chart

For those of you who missed Jeff Bailey's online seminar on point and figure charting last night, here is a brief explanation of the topic.

Aftermarket Technology Point and Figure Chart

For illustrative purposes only, lets walk through a point and figure chart using Aftermarket Technologies (NASD:ATAC) as an example. Starting back in early April of last year, ATAC reversed into a column of Os, and gave a double bottom sell signal (not shown because I couldn't fit it on the chart). ATAC then proceeded to trade lower for eight months without ever issuing a buy signal. ATAC finally bottomed at $1.75, and then consolidated in December (the red C) before flashing a buy signal in early January (Point #1). At this point sellers (supply) had finally stopped beating up the stock, and some buying (demand) started to enter the picture. That column of 11 Xs gave us the column to use for calculating the bullish price objective of $10.75. ATAC then pulled back, but has not issued a sell signal since. As Aftermarket continues to climb towards $10.75 it appears that demand is firmly in control as a pattern of advancing 6 or 7 boxes, and then pulling back 3 or 4 boxes has set up, but never attracting enough selling interest to flash a sell signal. Based on the current state of the chart, ATAC would have to trade $4.25 to flash a sell signal that would cancel our bullish price objective and suggest that supply has taken control. This was just a very quick explanation of point and figure charting, but the more it is used, the better feel a trader gets for how supply and demand affects a stock.

Jeffrey Canavan


Copyright 2001

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