Pocket Pivots by Gil Morales & Chris Kacher
Find buyable pivot points before the stock breaks out and
emerges into new high price ground. Here’s how.
In today’s fast-moving stock market, any technical breakout
or powerful price move instantly attracts a herd of
investors acting on the same information. Thus, certain
price/volume action in the market and in individual stocks
becomes obvious quickly, serving to minimize its effectiveness
when using standard interpretations such as new-high
or consolidation breakouts.
How does a trader gain an edge?
In technical analysis literature, you will find many references
and definitions to new-high pivot-point buy points as well as
trendline and moving average breakouts, but finding a definition
of “pocket pivot” buy point “signatures” will not be so easy.
The concept of “buying in the pocket” did not exist until
Chris Kacher described it in 2005. Simply put, a “pocket
pivot signature” is an early base breakout indicator designed
to find buyable pivot points within a stock’s base shortly before
the stock breaks out of its chart base or consolidation and
emerges into new-high price ground. It can also be employed
as a continuation buy point where a stock is well extended
from a recent base or consolidation after breaking out several
days or weeks earlier.
Institutional investors — for example, hedge funds, mutual
funds, and pension funds — do not begin buying any particular
stock on a breakout to new highs. Most of the time, they prefer
to buy stocks off of the price lows within a consolidation.
Intuitively, this makes perfect sense, as institutions create the
bottoms of chart bases, including the volume/accumulation
clues along the lows of a constructive base formation, and it
is institutions that come in and add to their positions in the
midst of a well-defined and persistent uptrend, far away from
“safe” support levels.