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Nasdaq-100 Point and Figure Charts of Interest

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Listed below are some point and figure charts that show the difference between a buy and sell signal, bullish and bearish price objective, and how to use the bearish resistance line.

Linear Technology (NASD:LLTC)

Linear Technology (NASD:LLTC) issued a buy signal, with a bullish price objective of 62 (9 * 1 * 3 = 27, 35 + 27 = 62). On the way to that objective, LLTC has met some stiff resistance at $52. Linear is going to have to break through that level, before prices fall to $47, and issue a sell signal that would cancel the bullish price objective.

Peoplesoft (NASD:PSFT)

Peoplesoft is good chart to look at, because calculating the bullish price objective is a bit tricky. PSFT issued a buy signal in late March with a column of 10 Xs. Five of those Xs have a box size of .5, and five Xs have a box size of 1. To obtain the bullish price objective, we have to break this into two separate calculations. First take the 5 Xs times the box size of .5 times the bullish multiplier of 3. (5 * .5 * 3 = 7.5). Repeat the same calculation for the other 5 Xs with a box size of 1 (5 * 1 * 3 = 15). Now we add those two together to get 22.5. Add that to the column low of 18, and you get a bullish price objective of 40.5. Take notice where Peoplesoft is trading now, 1 box away from the price objective. That's not to say it can't go higher, but if it can't go higher you'll know why.

Veritas (NASD:VRTS)

Veritas is a good example of how the bearish resistance line can uncover a resistance level you might not notice on a bar chart. VRTS made two attempts at breaking this line, but has failed each time. The last failure has flipped VRTS to a sell signal. We are currently making another attempt at the line, but with Veritas down .29 today, it looks like resistance will hold a little longer. Veritas would have to trade $72 to break the line, and put us back on a buy signal. So if we are currently on a sell signal, do we calculate a bullish or bearish price objective? Bearish price objective is the answer, and what is the bearish price multiplier? Two. No I don't know why we use 2 for bearish calculation, and 3 for a bullish calculation. Three makes sense in relation to a three-box reversal to change a column of Os to Xs, but I can't even make up a good lie for two. Those are just the numbers we point and figure geeks use. Anyways, the bearish price objective for Veritas is 58 (6 * 1 * 2 = 12, 70 - 12 = 58).

Jeffrey Canavan
Assistant Analyst

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