Commodity Strategies: High-Profit Techniques for Investors and Traders

CHAPTER 2

Patterns, Trends, and Price Objectives

As with any educationally geared book, like this one, it is important to start by laying a foundation. Just as with building a house, you must start block by block when laying the house's foundation. If this process is not properly done, then the house has little chance of sheltering you from the elements, let alone standing. The same can be said with respect to trading stocks, or commodities, with the Point & Figure method. So we begin this book with the basics—the building blocks of the Point & Figure methodology: patterns and trend lines. For some, this will likely be a review; for those new to technical analysis, and in particular Point & Figure, you will want to take your time working through this chapter, because everything to follow will build on this chapter's discussion. I have used this old saying in my life and it works: “Life's a cinch by the inch; life's hard by the yard.” Take this subject inch by inch and you will catch on very quickly. Try to bite off too much at a time and, like anything else, it becomes overwhelming.

The cornerstone of the Point & Figure (P&F) methodology is the irrefutable law of supply and demand. It is this simple economic concept that is responsible for the formation of the chart—in essence, the battle that is waged between supply and demand, and its related price changes, results in the different patterns being formed, and ultimately the overall trend of the commodity. I have found that commodity ...