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Keeping Perspective and Increasing Sensitivity with Intraday P&F Charts

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Intraday charts are normally associated with short-term analysis that extends anywhere from several days to several weeks. Even with the largest intraday timeframe, 60 minutes, bar charts get crowded with more than seven weeks of data. The chart below shows 60-minute bars for SPY going back 1 month and 15 days. This chart, size 620, is full with no room for more data, unless one chooses a wider chart size, which is possible.  If only there were a way to filter out the uneventful moves with the eventful moves.

110211spy60m

Enter the intraday P&F chart. The P&F chart below is based on 60-minute data and it extends all the way back to August. See the red “8” in the lower left. In fact, many 60-minute P&F charts extend back 3-6 months. Elapsed time depends on the number of price reversals because P&F charts extend only when prices reverse a specific amount. These 60-minute P&F charts offer both perspective and detail. In addition to the bigger trend, chartists can easily identify shorter trends, smaller patterns, support/resistance and breakouts.

110211spypnf

Chart Note: Intraday P&F charts default to 20-period Average True Range (ATR) for the box size. This means the box size is flexible and dependent on the price range of the security. The SPX ATR setting is at .43 currently. To fix this box size, move to "user defined" for scaling method and set the box size at .43. Percentage scaling is the alternative to ATR. This sets the box size at a fix percentage, just like a log scale on a bar chart.  Click here for more articles related to P&F charting.

Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com. He has written articles for numerous financial publications including Barrons and Stocks & Commodities magazine. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed technician. In addition to his CMT designation, Arthur holds an MBA from the Cass Business School at City University in London. Learn More
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The problem with using ATR on intra-day P&F charts is that once the ATR changes, which it does often, your signal will change. And so will the entire composition of the chart. Some of the breakouts that you show in August might not have happened that way as the ATR might have been different. Sometimes, vastly different. Using ATR on intra-day P&F charts is good for analysis, but lethal if you're trying to trade the signals as they will likely disappear as ATR changes. Shifting ATR, and Percentage for the matter, will throw your risk management into flux because stops will change (if you're using the P&F signal changes as stops). ATR & Percentage are not good for trading. If you're going to actually trade off intra-day P&F charts, my advice would be to stabilize (fix point size) the box size so that your signals don't shift. Regards; Keith Chip's Comment: That's our advice also.

Posted by: Keith Shepard February 11, 2011 at 10:50 AM

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