One of the charting methods used to assess the overall strength of the market is point-and-figure charting. The first point-and-figure analysis you should be aware of is the use of trendlines, both the bullish support line and the bearish resistance line. These trendlines are not drawn the same way as they are on bar or line charts. The bullish support line is essentially a 45-degree line sloping upward from left to right, starting at the bottom of a recent low. This is illustrated by the line of plus signs in the below figure.

The bearish resistance line is the inverse. It is a line sloping down from left to right, drawn from the top of a recent high on the point-and-figure chart. This line also slopes at a 45-degree angle. This is shown in the above figure as a line of minus signs. These lines make it simple to come to a general conclusion regarding the object of the study. If the price action is above the bullish support line, one looks to go long. If, however, that line is broken with a downward move in the price action, one looks for shorting opportunities while the price action is below the bearish resistance line.

Beyond these simple trendlines, there are patterns within the point-and-figure chart that are worth looking for. The most common are either breakouts of multiple tops or bottoms, or breakouts from triangle patterns.

The breakouts from a triple-top and a triple-bottom are shown in the below figure.

These charts make it easier to spot breakouts from areas of price congestion, since they take out the time element inherent in a normal bar or line chart and focus purely on the price movement. Again, these patterns are easily interpreted: A market that has completed a bullish breakout of a triple-top suggests that longs provide the best opportunity, whereas one that has just broken out from a triple-bottom suggests that shorts are the way to go.

Triangles on point-and-figure charts are interpreted similarly to the way they are on line or bar charts. A triangle breakout is shown in the below figure.

The direction of the breakout will indicate whether longs or shorts are preferred. Obviously, a breakout to the upside suggests longs and a breakout to the downside suggests shorts.