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Point and Figure False Breaks

False Break Chart Patterns

Similar to bull and bear traps, false (or marginal) breaks occur at minor Point and Figure support levels (from a previous low) or minor resistance levels (from a previous high). They should only be traded in an established trend.

Point and Figure Up-Trend

In a Point and Figure up-trend, if price falls below the previous low by only a small margin (normally only one box) and then promptly reverses upwards, buy on recovery above the previous low.

A possible weakness of Point and Figure charts: you will not see the recovery until price has increased by the reversal amount.

Point and Figure Down-Trend

The same applies to down-trends. If price rises above the previous high by a small margin and then promptly reverses, buy on the retreat below the previous high.



 
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