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Yes I bought the June 29th pocket pivot launch off the 20 dma due to the very high RS coupled with the pocket pivot volume as the market was having a powerful follow through day. Buy one at 29.20 and buy two at 29.35. Average cost was 29.22
The break on July 2 as the market rallied, immediately told me something was wrong but my rules say to hold it for three days. One day might be merely a shake out.
July 3 had a rally in excruciatingly low volume. But with pre-holiday trade and the three day hold rule I hung in there.
July 5th was a rally day with accululation showing only because July 3 volume was so miniscule and definitely not enough volume to overwhelm the July 2 selling. With the S&P 500 posting distribution that was all I needed to close the position at 29.23 with a one penny gain.
If I had been slow on this trade, additional distribution showed up in CRUS on 7/6 and that should have been enough to let everyone watching price and volume that 7/6 was not the right time to be long this stock.
Abe, Did you make up that 3/4 day sell rule for yourself or did you get that rule out of a book? Thanks.
It's a bit like treating each buy of a stock like day one of an index downtrend reversal. You want to see a follow through day in your stock very quickly after you buy it. The best stocks can show accumulation for several days in a row and then accumulate every three - four days. See LULU in November 2010 or SINA in Sept/October 2010. That's where I learned it.
So it is a technique I needed to develop and apply to individual stocks, but it comes from applying accum/dist day counts to the best CAN SLIM leaders as described in the book.
Please define this rule exactly.
Well it isn't exact. Each 3/4 day accumulation/distribution weighting is different from one another.
CRUS trade from 7/2 - 7/6 provides a very clear example. The four days that ended on 7/6 show a distinct excess of selling volume over buying volume. The fact that the trade is lower in price than the pocket pivot is significant as well. Add that together and you have a pretty clear warning sign.
The exact rule that I used to capture the one penny gain was straight from Chart Arcade - Ten Rules That Work.
"If three days occur without accumulation and the market is headed lower, sell". I threw out accumulation on 7/5 because the volume was so small and just about all trade over the three days was lower in price than the 6/29 pocket pivot.
@ Abe. Out of curiosity, would you have considered the move in GNC on 6/29 a pocket pivot? Broke through the 50 dma. by my count the volume that day was higher than any down day until 6/18- which was day 10- but that day looks like support to me, closing near the top of the range. And 6/17 was down in high volume but closed in the middle of the range.
if so- how would you have interpreted that chart w/ your 3/4 day accumulation rule?
Abe how often after you walk away from a position the stock reverses and heads higher. Even thou i see the logic behind this rule I feel like at times it can come back and bite you with whipsaws. Maybe its a good rule to use to trim the position.
Abe, nice post on your trade history/log.
@steveg - On 6/29 in GNC there were only nine trading days after the heavy volume red day of 6/15. I am pretty sure Dr. K says "higher volume than any down day in the PREVIOUS ten days." I don't include the pocket pivot day in the count. So technically not a stand alone pocket pivot. However when you couple it with the four days of accumulation during the nine days, no distribution and that 6/15 & 6/18 red days seeming more like support rather than disrubiton, 6/29 was successful.
@thinkbigr - you can always buy it back if it launches higher. Nothing is 100%, but after a few years of CAN SLIM you really start to hate 7% losses. So I only trust a pocket pivot from the top of a valid CAN SLIM base, 50 dma or 20 dma. And those I only trust for 3 or 4 days. During which it had better prove to me that it can quickly show more accumulaiton and quickly get higher in price.
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