The Chart Professor is back so we can dive further into the stock charts you need to understand and analyze to make smart investment decisions.
This week Bruce Kamich, our resident Chart Professor and in-house technical analyst, helps us really understand the point and figure chart. It's one of the oldest charts in U.S. and dates back to 1880's. A mark only is made on this chart when the stock moves a predetermined price. In the chart in this video, each "X" represents a move up. A "0" notes a reaction to the move.
And while it looks like you charting out football plays, it's worth taking the time to really understand it -- because too many investors don't.
Here are the pros and cons, per Kamich:
- Just focuses on price changes - ignores "noise," volume and time
- Breakouts and breakdowns are clearer
- Can give longer-term price targets
- Not popular
- Conceptually hard to understand at first
Be sure to check out our other great chart videos too:
- Chart Professor: 3 Things You Need to Know About Every Stock Chart
- Chart Professor: How to Make Money from a Stock Line Graph
- Chart Professor: A Bar Graph Shows a Stock's Extremes and Gaps
Read more from Kamich on Real Money and learn from the best.