The Lost Art of Point-and-Figure Charting

The crypto markets are known for their extreme volatility. It wouldn’t be excessive to say that double-digit days are the norm, not the exception. Volatility is the siren song for retail traders, who focus on short-term price swings, underestimating how important the big picture is.

Wyckoffians have a secret tool to analyze these assets from a different perspective. We are talking about Point and Figure (PnF) charts, the oldest form of technical analysis. Bruce Fraser has discussed countless times how to use horizontal counts to predict precise targets in his legendary blog, Wyckoff Power Charting. Although Stockcharts.com features the most accurate PnF engine, cryptocurrencies are unfortunately not available on this platform. In this blog, we will demonstrate the utility of an alternative application, Bull’s-Eye Broker.

Here is a case study of Chainlink, a cryptocurrency that experienced a 1000x run in just a couple of months. The data feed is freely available on cryptocompare and Yahoo Finance. The first parameter to set is a 1-box reversal using the Wyckoff technique. For these very low-priced, volatile cryptos custom scaling is extremely important: here we have defined the box size at 0.06.

Percentage scaling also can be really useful to track cryptocurrencies.

High volatility in a trading range can generate large PnF counts in a very short time. This particularly applies to the low-cap cryptos, whose price action seems to recapitulate years and years of historical data for stocks like Amazon in the blink of an eye.

The aggressive count (highlighted in blue in the chart above) refers to an accumulation base of 1 1/2 years, which represents a very significant period of time in the crypto space.

Let’s analyze now the vertical chart.

The catalyst for the big run was news of an important partnership with Google Cloud, which became public only after there was clear evidence of absorption on the tape. Focus on the yellow spot in the chart below. Release of the news was perfectly timed for a long entry. Coincidence?

Trading altcoins is all about efficiency. Because of the extremely fast market cycles of cryptocurrencies, a single small cash position at the right time can easily outperform all the returns from your swing positions in just a few weeks. That’s why it’s very important to take a global view.

Two more charting platforms, Tradingview and Quantower, have recently implemented the Wyckoff Calculation for Point and Figure. We will discuss how to use these charting platforms in the next blogs.