Percent Index (BPI) is a breadth
indicator based on the number of stocks on Point & Figure buy signals within an index. Developed by Abe Cohen in the mid 1950s, the Bullish Percent Index was originally applied to NYSE
stocks. Cohen was the first editor of ChartCraft, which later became Investors Intelligence. BPI signals were further refined by Earl Blumenthal in the mid 70's and Mike Burke in the early 80's. Because a stock is either on a P&F buy or sell signal, there is no ambiguity when it comes to P&F charts. This makes BPI a straightforward indicator with clearly defined signals. This article will cover
six different Bullish Percent Index signals derived from Point & Figure charts: bull
/bear confirmed, bull/bear alerts and bull/bear correction.
The calculation is straight-forward and simple.
Number of stocks on P&F buy signals/total number of stocks
Bullish Percent calculations are done using Traditional box sizing and 3-box reversal P&F charts.
There are over a dozen P&F signals, but only two basic signals. X's represent advancing columns and O's represent declining columns. P&F columns alternate as prices reverse
and change direction. A basic P&F buy signal occurs when a column of X's exceeds the prior column of X's. A basic P&F sell signal occurs when a column of O's exceeds the prior column of O's.
StockCharts.com uses traditional 3-box reversal P&F charts for the Bullish Percent Indices. Each box represents 2%. This means it takes at least a 6% move in BPI for a reversal. Three boxes at 2% equals 6% (3 x 2% = 6%). A 6% move would be from 42% to 48% or from 64% to 58%. 6% does not refer to the actual percentage change. A column of O's (decline) can only be reversed
with a 6% advance, which would form a new column with three X's. A column of X's (advance) can only be reversed with a 6% decline, which would form a new column with three O's.
The Bullish Percent Index (BPI) fluctuates between 0% and 100%.
In its most basic form, the Bullish Percent Index favors the bulls
when above 50% and the bears
when below 50%. The bulls have the edge when over 50% of stocks are on a P&F buy signal. BPI is also considered overbought when above 70% and oversold when below 30%. In addition to these basic interpretations, three signal pairings have evolved over the years (decades). Below is a description covering
the basic elements for these signals. Cohen, Blumenthal and Burke also used specific BPI levels to qualify some of their signals, such as 30%, 49%, 50%, 52%, 68% and 70%. The signals in this article focus on the basic elements.
Bull Alert: BPI is below 30% and then forms a new column of X's (rises)
Alert: BPI is above 70% and then forms a new column of O's that decline below 70%.
Bull Confirmed: BPI is on a P&F buy signal and in a column of X's (rising).
Bear Confirmed: BPI is on a P&F sell signal and in a column of O's (falling).
Bull Correction: BPI is on a P&F buy signal, but currently falling (column of O's.
Bear Correction: BPI is on a P&F sell signal, but currently rising (column of X's).
The Bullish Percent Index offers something for all sorts of traders. Bottom pickers can look for bullish reversals below 30%. Top pickers can look for bearish
reversals above 70%. These are the more risky entries because tops and bottoms can extend over time. There may also be a test of the prior lows or prior highs. Trend followers can look for bullish reversals occurring above the 50% level. A bullish bias is already present when over 50% of stocks are on P&F buy signals.