Count

Count, or vertical count,  is a term used in conjunction with Point & Figure charts.  The vertical count method is based on the length of an important column. The column can be one that marks a significant high or low.

Count

Count, or vertical count,  is a term used in conjunction with Point & Figure charts.  The vertical count method is based on the length of an important column. The column can be one that marks a significant high or low.

Alternatively, the column could be one that triggers a breakout. Once the column is complete, the technical analyst can apply a simple formula to project a future column high or low and use this as a price objective.


Calculation of Count

The column (or Count Column) upon which to base the count must first be established.  The Count Column should signal either a reversal or continuation pattern with an upside breakout or a downside breakdown. Double Bottom Breakdowns and Double Top Breakouts are the most often P&F signals required to establish a Count Column.

Once the Count Column has been chosen, then the technical analyst must wait for the column to be completed to get the exact box count (X's or O's).  It should be noted that a column is subject to change until a 3-box reversal forms in a new column.

The next step is to count the number of X's or O's in the Count Column. This count is then multiplied by the box size and the reversal amount to define the extension. For example, a column of 7 X's on 1 x 3 P&F chart would yield a count of21 (7 x 1 x 3 = 21), where there is 1 point per box and 3-boxes for a reversal.

Application of Vertical Count

For bullish breakouts, the extension (21) is added to the base (low) of the vertical Count Column to attain a projected price target. The figure below illustrates the calculation and price extension for the bullish breakout.

Point and Figure chart illustrating vertical count and price extension

RELATED TERMS

The calculation is exactly the same for bearish breakdowns except the Count Column is O's instead of X's and the extension is projected downwards to obtain a price target.

The above example is one way of using the Count to establish a price extension.  There are many variations including where the extension (activation) starts and the calculation of the extension.

Many technical analysts only trade in the direction of the long term trend. This means taking bullish signals when the stock price is above the long term bullish trend (support) line. Conversely, bearish signals are preferred when the trend is down and prices are below the bearish resistance line.