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.

Over three centuries ago, rice-futures traders noticed the repetitive patterns in candlestick charts, which predicted future price movements in the commodity contracts traded. It should be noted that candlestick analysis is somewhat more sensitive than regular daily chart analysis in that it generates more signals. Given this profusion of signals, it is important to be aware of when those patterns appear in the trend so that more or less weight can be assigned to them in your analysis. If a candlestick reversal pattern appears at the end of an extended trend, you tend to believe it more than a reversal pattern that appears at the beginning of a new trend.

Patterns formed using multiple candlesticks tend to carry more weight than single candlestick patterns. We will begin with analysis of specific, well-known single-candlestick formations, which will become part of multicandlestick formations as we progress.

The „doji“, as illustrated in the below figure, is a warning signal. It signifies equal strength between those who are bullish and those who are bearish on a security (or whatever is the subject of the candlestick study). As such, the doji by itself can indicate an uncertain future, since neither the bulls nor the bears have the upper hand. When the doji appears in multicandlestick formations, it makes those formations more accurate in their prediction of future price action.