The next chart pattern we will learn are ‘POLES’
Poles are also a 3-box pattern. They are reversal patterns and never continuation.
A pole is a long column of Xs or Os with a column of Os or Xs alongside it. Although poles are reversal patterns, not every pole you see will work as such.
There are specific conditions which must apply before the pole can be considered as a reversal. There are high poles as well as low poles. It is, however, possible to see them on 1 -box charts. For a pole to occur there should be some sideways consolidation prior to the pole. Usually there is further sideways consolidation on the other side of the pole before the pattern breaks. The pole is an opportunity to enter a trade before the pattern is complete.
Poles occur when price breaks above (or below) previous price action and a long column of Xs or Os is created. This breakout column must exceed previous highs or lows by at least 3 boxes; this is what the author of the book 'Chart for Profit: Point and Figure Trading': Earl Blumenthal specifies but this may not be enough. The less the number of boxes, the greater the chance of a failure, so you should be looking for more than 5 boxes in height for poles to be effective. The reason has to do with the psychological make-up of the pattern discussed below. After the initial breakout column, the very next column must be an opposing column of Os or Xs in the opposite direction, adjacent to the breakout column. This column must retrace the previous breakout column by more than 50% for a pole to be in the making; so if the breakout column was 10 Xs, the pole will be made after the 5th 0 in the next column.
Poles can occur in uptrends or downtrends. High poles indicate near-term weakness and low poles indicate near-term strength.