PPR - General Thoughts on Pocket Pivots Currently

Published : January 25 2011 at 12:24 ET

Attesting to the fact that most traders and investors just can't go a single day without "something to do," we have received a number of emails pointing out pocket pivots and wondering why we are not issuing these in alerts. The fact is that we don't see the risk/reward equation in this market, given recent action in the indexes as well as leading stocks, as being favorable for the implementation of pocket pivots. We see everything in the market, for the most part, and even if we see stocks like BIDU, BORN, GMCR or some $8 solar stock showing a pocket pivot type of signature we don't see any reason to lead anyone over a cliff here. We prefer to choose the most optimal window within which to operate at any given time.

Sometimes the best course of action is none at all. Jesse Livermore pointed out that "There have been many times when I, like many other speculators, have not had the patience to await the sure thing. I wanted to have an interest at all times. You may say, 'With all your experience, why did you allow yourself to do so?' The answer to that is that I am human and subject to human weakness." In our human weakness we find it hard to be like the man who came off the mountain every so often to place his trades and whom Livermore quotes in "Reminiscences of a Stock Operator." This man made speculation a business, and his most astute observation, in our view, is that "Real movements do not end the day they start."

Hence in uncertain environments, pocket pivots and pivots of any type will be less reliable. If we alert members to a stock showing a pocket pivot during such times, the stock will have to be nearly flawless. We might be more comfortable picking up pocket pivots if the market were already in a period of consolidation, similar to the end of August, when pocket pivots are often early clues of a market about to turn to the upside as they were in the August/September timeframe.

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