Stocks & Commodities V. 30:13 (40-47): Pocket Pivots by Gil Morales & Chris Kacher

Pocket Pivots by Gil Morales & Chris Kacher

Potent Weaponry

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.