The revelation of Point & Figure charts
Back in the late 1950's I had the great experience of discovering Point and Figure Charts. Bob Smith, a guy in some of my business classes, worked for Chartcraft which was then located in Manhattan. Bob was nice enough to show a bunch of us how to keep these charts and I fell in love with them right away. Unlike bar charts, you didn't have to post them every day, only when the price changed. The late Abe Cohen used to say that point and figure charts "shouted", while other charts "stuttered". I bought a notebook that had lined graph paper in it and every day I would sit in my classes listening to the history teacher, or whatever, while I was bringing my charts of Pan Am and US Steel up to date. One of things I have always told people is that charts are an organized way of looking at your stocks. If you look at the price in the paper every day, it is easy to bring up a chart so at least you will know where the price and movement has come from. Once in a while I go to Business Conventions where companies discuss their prospects and occasionally I see Bob at some of those.
I have already mentioned the Specialist who was a guest at City College, but I didn't mention the "Up Book" and the "Down Book". Unlike what you would think it is much more bullish if there are a lot of sell orders on the Specialists’ books at higher than the current price than it is if there are a lot of buy orders below the market price on the book. This is very, very valuable information and probably one of the reasons why the NYSE does not give up its antiquated trading methods and go electronic like NASDAQ. The Specialists, and in some cases their friends, are also well aware of where there are lots of stop losses, who the big buyers and sellers are and what the short sellers are doing.
The main reason the "Up Book” with lots of overhead sellers is good is that it provides supply for the big buyers. Big buyers want to be able to buy substantial positions and they are not able to do that if there is not much stock for sale. A later guest speaker at CCNY was a mutual fund manager from Tri-continental. He said that if he liked two stocks and was trying to build a position in them and one of them ran up from him quickly while they only had a small position, they would sell it and put the money in the second stock.
© Chartcraft Inc, January 18, 2002