Stocks breakout from properly formed bases everyday but many investors don't understand how to locate a pivot point or what patterns to study that may contain this very important buy signal. A pivot point can be described as the optimal buy point or the area at the end of a familiar base pattern where the stock breaks out into new high territory. William O'Neil, the founder of Investor's Business Daily is considered the pioneer of the pivot point in modern times. As Jesse Livermore explains in his book (1941), the pivot point can also be described as the point of least resistance. When a stock breaks the point of least resistance, we are presented with an opportunity where a stock has the greatest chance of moving higher in a short period of time, especially when volume accompanies the breakout.
The pivot point can be calculated as the stock is forming the handle on a cup-with-handle base. The ideal buy price would be $0.10 higher than the highest spot during the handle, also know as the top of the right side of the base. The intraday high can qualify at the highest point and does not have to be the closing price of the stock. If the stock closes at the high for the day, then we will use this number as the high point.
The exact methods used for finding pivot points vary depending on the base pattern that is forming on a daily and/or weekly chart.
When a flat base occurs, an investor should look for a move $0.10 higher than the top point on the left side of the base or the start of the formation.
A saucer-with-handle follows the same rules as the cup-with-handle and is described in detail above.
A double-bottom formation triggers a pivot point that will be $0.10 higher than the middle peak in the "W" shaped pattern.
Many investors will try to cheat the rules and place a position prematurely before the stock breaks out and passes the pivot point. I do not suggest buying until the stock triggers the pivot point on above average volume also known as qualifying volume. The area considered as the least amount of resistance is weighed so heavily because all overhead sellers are gone as we break into new high territory. The pivot point usually comes within 5% to 15% of the stock's old high 52-week high.
Don't chase a stock that is 5% or more above the proper pivot point. This does not mean that you can't buy on normal corrections and pullbacks to support or moving averages, especially if the stock remains in an uptrend. This rule only applies to the pivot point area as the stock becomes extended. If you buy with the pivot point and sell when a stock falls 7-10% from the pivot point, I guarantee that your yearly performance will increase dramatically.
Chris Perruna - http://www.marketstockwatch.com
Chris is the founder and president of MarketStockWatch.com, an internet community that teaches you how to invest your money with solid rules. We don't stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful.
Lincoln Stretch rentals Alsip ..The gleam and bright lights of Wall Street lure in... Read More
Have you ever thought of investing? Do you have a... Read More
When you become interested in a stock or mutual fund... Read More
A Guide to Using Stop Loss Orders Stop losses are... Read More
If you've ever flipped on the television to CNN Financial... Read More
An investor can find and research the best stock on... Read More
During our travel down life's path we come to many... Read More
Three little pigs went to the market to stock up... Read More
I would like to share with the reader an article... Read More
Minority Report the movie may not be far off if... Read More
Being wrong is OK, but let's not carry it to... Read More
Most advisors will tell you they can beat the market.... Read More
Do you have a financial planner? Does one of your... Read More
You have heard about a particular mutual fund from a... Read More
Profitable day traders recognize that momentum trading is among the... Read More
Stock trading remains a very competitive field and the stock... Read More
"There is nothing more frightful than ignorance in action!" Johann... Read More
With over 6,000 mutual funds available, it may be tempting... Read More
Wall Street has been preaching for years and years to... Read More
Hedge current portfolio positions and gain access to capital resources... Read More
I read a comment by a forum member on another... Read More
One of the basic laws of physics states that a... Read More
I mean it when I say that. While plastic silverware... Read More
How can you dispel an illusion unless you look directly... Read More
I have watched my cat play with a bag of... Read More
Western Springs shuttle limo ..A Guide to Using Stop Loss Orders Stop losses are... Read More
Let's first define insanity. It is doing the same thing... Read More
You must take the time once a month to review... Read More
Before you buy another car you walk around the lot,... Read More
What the heck am I talking about?It is often said... Read More
During the month of January the Dow Jones Industrial Average,... Read More
I am hearing predictions by brokers, financial planners, talk show... Read More
You have decided to buy some stock or mutual funds,... Read More
Maximizing a stock market investmentThere are several factors an investor... Read More
I have been trading for several decades and was an... Read More
When we go to the circus we see a trapeze... Read More
When an individual investor wants to roll up his sleeves... Read More
Mutual funds were moderately successful in creating a presence in... Read More
When you become interested in a stock or mutual fund... Read More
When is a dividend not a dividend?The latest thing "conservative"... Read More
The ABC's of Stock Trading SuccessStock trading success...why is it... Read More
When the stock market is going up and all your... Read More
For the last few weeks we have seen the stock... Read More
The big bad bear is stirring again. So far he... Read More
TOO OFTEN, INVESTORS SIMPLY CHOOSE TO follow the crowd. This... Read More
Did you know you can make money (and a lot... Read More
Its dinnertime and the phone rings. It's Joe Noname with... Read More
The stock market has been in an up trend for... Read More
The single most expensive stock market trades are those made... Read More
Wall Street has been preaching for years and years to... Read More
Stocks & Mutual Fund |