Pocket Pivot

One distinct feature you might see in a stock involves the pocket pivot. This occurs when the stock experiences a slight change in its value after a consistent decline or rise. For instance, you might notice five or more candlesticks where the stock either keeps going down or has an extremely minimal increase. Either way, the stock would be falling. On the sixth candlestick, you will see a significant rise in the stock’s value. That rise might be small but still noticeable. There are three things that must be noticed in a pocket pivot pattern:

1. The stock must be going in the opposite direction.
2. The change in the stock’s value should be significant at this juncture. It should be higher in value than the changes on the candlesticks that came before it. For instance, a stock might have declined by 40 cents on one stick and then 50 on the next. The pocket point shows that the stock is going up by 60 cents.
3. The stock’s trade volume should be higher than it was in the last few trading periods. The best pocket pivots occur when the volume is close to twice what it was before the pivot took place.

This is a rather small pattern when compared with other investments and it is one that can repeat itself many times over on a chart. You might see a pocket pivot taking place every few days or even every couple of hours. This is because a cycle is established where people are willing to buy the stock and then sell it off quickly. A pocket pivot shows that the stock in question is well-controlled and that the investors have an idea of what they want to do with it. Use this part of a trade to see how a stock is moving and that you have an idea of where it is about to head.

A stop-loss order may be applied to the opposite end of the pivot point if necessary. This is enough to keep control while getting a decent value going.

Each of these patterns on a stock market chart shows that a stock can move in many directions. Be aware of how these patterns develop so you can have an idea of not only where a stock will head but also how the prices might change within a pattern.