Traders' Tips from TASC Magazine

Bridging the Gap, Linking Point & Figure and Bar Charts

Robert Busby’s article, “Bridging the Gap, Linking Point & Figure and Bar Charts” was published in the January 2005 issue. The charts and analysis he describes are part of the features added to the version 9.0 of MetaStock released last year. Below is a Point & Figure chart of IBM. The red resistance and green support lines indicators based on the movement of the Point & Figure chart.

As you can see in upper portion of the image below, this is the same chart as a bar chart. The support and resistance trend lines have been carried over and plot the same values. The black line over the prices is the current box from the Point & Figure chart. Further, we have attached on a Point & Figure Expert Advisor which is coloring the price bars red when a column of O’s is being drawn and blue when the Point & Figure chart is drawing a column of X’s. Also, a ribbon is drawn at the bottom of the chart showing when the long term trend of Point & Figure chart is bullish or bearish, based on the interaction of the chart and the support and resistance trend lines.

Steve Palmquist’s article, “Trading Moving Average Pullbacks,” introduces his MAPS system. An exploration to search for these signals can be created in MetaStock with the following steps:

1. Select Tools >the Explorer.
2. Click New to open the Exploration Editor.
3. Enter a name for the exploration.
4. Select the Filter , in the middle on the right-hand side.
   
5. Click in the larger window and type in the formula:
   
   LLV(C,5)>Ref(HHV(C,20),-20) AND Sum( C < Mov(C,30,S),30)=0 AND ((C-Mov(C,30,S))<(0.015*C))
   
   
6. Click OK to close the editor

The securities found by this exploration will be possible candidates for MAPS trades. The entry rules say to buy tomorrow if the security trades above the current day’s high.

A system test for MAPS can be created as follows:

1. Select Tools >the Enhanced System Tester.
2. Click New.
3. Enter a name for the system.
4. Select the Buy Order tab and enter the following formula:
   
   setup:=LLV(C,5)>Ref(HHV(C,20),-20) AND Sum(C< Mov(C,30,S),30)=0 AND ((C-Mov(C,30,S))<(0.015*C));
   
   Ref(setup,-1) AND H>Ref(H,-1)
   
   
5. Select the Sell Order tab and enter the following formula:
   
   Simulation.CurrentPositionAge=3
   
   

The above system uses a function for the Sell condition that is only available in MetaStock version 8.0 or later. If you are using a version of MetaStock that is earlier than 8.0, then replace step 5 above with the steps below:

6. Click the Stops button.
7. In the Stops window, select the Inactivity tab.
8. Set the Positions to "Long" and the Method to "Percent".
9. Set the Minimum Change to "9999".
10. Set the Periods to "3".
11. Click OK to close the Stops window