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Forex Articles » Trading for Beginners » What is a Pivot Point and why should investors focus on them ?

What is a Pivot Point and why should investors focus on them ?


A Pivot Point resides near the top of a trading range as a stock is developing a Handle. The proper time to buy a stock is when it begins to break above its Pivot Point and is accompanied by increasing volume.

Here are some Examples

EBAY formed a 1 year Cup and then developed a 6 week Handle with a trading range between $65 and $71. The top of the trading range was near $71 which acted as the Pivot Point for EBAY. EBAY eventually broke above its Pivot Point in early January accompanied by an in increase in volume (point A).

pivot-points-ai

Another example is shown by ERES which formed a 1 1/2 year Cup followed by the development of an 8 week Handle with a trading range between $10 and $11. In this case the top of the trading range was near $11 which served as the Pivot Point. ERES broke above its Pivot Point in April of 2002 accompanied by very strong volume (point B).

pivot-points-ai1

Another example is of HITK which formed a 1 1/2 year Cup followed by a 5 week Handle (point C) with a trading range between $9 and $11. In this example the top of the trading range was near $11 which served as the Pivot Point. HITK eventually broke above its Pivot Point in November of 2002 accompanied by an increasing in volume as well (point D).

pivot-points-ai1

As you can see the best time to purchase a stock is when it begins to break out of a favorable chart pattern such as the "Cup and Handle" and above its Pivot Point accompanied by increasing volume.

Regards,

By Bob Kleyla
May 2004
http://www.amateur-investor.net/