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  Relative strength in point and figure format This chart is constructed with a filter that completely damps out movement that is less than three boxes. This ensures that the chart emphasizes the long-term trend characteristics of the chart.LONG-TERM 3 BOX –POINT AND FIGURE CHART OF RELATIVE STRENGTH – RS vs S&P 500 – PLOTTED DAILY. W. Clay Allen CFA Page 1 10/7/2003  “You cannot manage what you do not measure” This chart covers 3.5 years. The persistent uptrend of the past 1.5 years shows clearly. If your objective is to out-perform a market index then it is important to measure the components of the portfolio in terms of that index. Most large portfolios are measured against the S&P 500. The data must be filtered to eliminate the noise from the market and to focus attention on the long-term major movement. This is the primary reason for tracking relative strength in a filtered point and figure format W. Clay Allen CFA Page 2 10/7/2003  Combines advantages of each method relative strength with point and figure -Damps out short- term meaningless variation (i.e. noise) - Measures price movement relative to the market - Signal patterns the same - Long-term orientation It is important to avoid responding to short-term price action that might lead to the premature sale of a major winner BUY SIGNALLONG-TERM BULL MARKET MOVE W. Clay Allen CFA Page 3 10/7/2003  Support and resistance lines seem to be more effective 45-degree bearish resistance line 45-degree bullish support line The 45-degree risk vs return lines are a very important part of relative strength point and figure charting. They provide a simple and highly visual method for tracking the performance of the stocks in a portfolio. It is very easy to categorize the performance as acceptable or unacceptable. W. Clay Allen CFA Page 4 10/7/2003


Jul 23, 2017
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