CHAPTER 3

Chart Patterns

images Recording the Battle between Supply and Demand

The nuts and bolts of the Point and Figure method have not changed for over 140 years, and this is good news. Once you learn the patterns, and they are fixed in your mind, the computer will do the rest. Though we always find new ways to use this method, we never step out of the basics of Economics 101. The backbone of Point and Figure analysis is the chart pattern. The beauty of this method is its ability to form simple chart patterns that record the battle between supply and demand. The reason this method is so credible is that it is founded on the irrefutable law of supply and demand, which affects our lives on a daily basis. Although just about everything we come in contact with has some association with supply and demand, it wasn't until my first course in college-level economics that I really thought about and came to understand this basic law. Heck, for the previous 22 years I had simply taken price change at face value—prices changed and that was it. It was that Economics 101 class in college that taught me to appreciate the laws of supply and demand. You know what? Most people never gain a full understanding of it. When I learned the concept of elasticity of demand in that course, I would go into supermarkets without a penny in my pocket and walk around and marvel at prices. I would go to the meat department ...

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