Chuck, in reference to pivot points
That is a subject of daily intrigue for technical analysts. In my opinion it is the key component to our job. In general pivot points are reference areas on a stock or index that seems to get what I call--turning action. This could be an index or stock churning at the top or bottom. It could also be a certain repeated candlestick pattern that continues to mark highs or lows on a regular basis. It could also be part of diagram technical analysis, where one focuses on wedges, flags, channels, triangles, and the like for short/long term movements.
A trading program I run based on the stochastic and adx indicators signaled a buy on the OEX at 642 on close 2/23/2001. I was quite pleased that the OEX rallied to 659 two days later, and equally pleased that the OEX has refused to go below 625 both before and after the buy at 642 was established. Notice the run up and draw down is exactly 17 points, with 642 right in the middle. I am now 90% convinced that this marks a short term bottom and a rally to 690-712 will happen this month. I was also pleased that Dick McCabe of Merryl Lynch, who must run a similar program announced the same oversold condition, lending institutional spin and cash which will be needed to pump short term confidence in the market. His credibility is good, he signaled to sell tech in January calling for new lows in NASDAQ.
Pivot points need support, so I looked no further than the VIX. If you look at the VIX on a daily candlestick chart going back to August, one will see that anytime there has been two consecutive large body red sticks fully above the thirty level has resulted in a short term market turn. So there is more evidence of a potential rally coming.
Bottom line it takes a lot of work and investigative skills. |
