Tag Archives: Pivot Point

3 Reasons to Watch the $SOX

I hope you all had a great Fourth of July and are relaxed and ready for some market action, because the Philadelphia Semiconductor Index ($SOX) looks rested and ready for a breakout. I have three reasons to watch this index for big movement today.

1. Price is Coiling in a 15-Minute Chart

The 15-minute chart of the $SOX shows price has coiled into a triangle/wedge pattern the last three trading sessions. This behavior usually precedes a breakout opportunity.

The fact that the height of the triangle is 18.50 points indicates we could see a very powerful breakout soon – one that could move the index 18.50 points in the direction of the breakout.

If price opens beyond $335 or $326, there’s a good shot that we will test either $353.50 (bullish breakout) or $307.50 (bearish breakout).

Philadelphia Semiconductor Index

2. Two-Day Inside Value Relationship

The 15-minute chart also shows the $SOX has formed a 2-Day Inside Value Relationship using the central pivot range – which indicates a big breakout is ahead.

Remember, this relationship occurs when the upcoming day’s pivot range is inside the pivot range from the prior session, which means price is coiling for a potential breakout.

Again, if we see confirmation outside of $335 or $326, we could get a very nice move ahead.

Philadelphia Semiconductor Index

3. $SOX is Sitting on Daily Chart Support

The daily chart of the $SOX shows price is beginning to show early signs of strength off a well-defined support level at about $326.25.

Price has rallied three times from this support level over the last two months, with the moves ranging from $39 to $50 points.

Price is clearly poised to move away from this support level, either up or down. Just wait for confirmation.

Philadelphia Semiconductor Index

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I can’t wait to see how this week turns out!

Cheers!

Frank Ochoa
PivotBoss.com

Follow Frank on Twitter: http://twitter.com/PivotBoss

3 Thoughts on the Dow

The Dow Jones Industrial Average ($DJI) experienced an incredible reversal today after testing the 10,600 level, which left many people scratching their heads about direction, including me. Fortunately, I’ve got three thoughts on the Dow, which could help to shed some light on future direction.

1. Today’s daily bar candlestick is incredibly bearish.

The Dow opened the session with early strength this morning, but immediately found sellers once price approached the 10,600 level. Price reversed sharply from this area and dropped throughout the session, creating a shooting star candlestick, which is basically a candle with a long shadow (tail or wick) at the top of the bar.

This candlestick formation is highly bearish and foreshadows a potential retracement ahead. Every significant reversal over the last six months has been highlighted by this type of candlestick pattern, as seen in the chart.

However, in order to confirm a bearish reversal, you must see price close below the low of the this candlestick in the next session or two. Therefore, we could see more selling pressure ahead should price close below 10,395 tomorrow.

Dow Jones Industrial Average

2. The Dow reversed from the 50% Fibonacci Retracement level.

The shooting star candlestick formed after price tested the 50% Fibonacci Retracement level at 10,508, as measured from the April high to the June low. Coincidence? Maybe. Maybe not.

The fact that sellers aggressively entered the market after price reached the 50% Fib level indicates more selling ahead, potentially back to the 10,180 level, which is the 50% Fib level of the recent rally (June low to June high).

3. The Dow reversed from a major area of pivot confluence.

The tail of today’s bearish candlestick tagged important monthly pivots from both the Floor Pivots indicator and the Camarilla Equation.

The top of the central pivot range was wicked at 10,475, while the H3 Camarilla level was tested at 10,528. The fact that price reacted adversely after testing these pivots indicates weakness ahead.

Again, price must close below 10,395 in order to confirm a decline.

Final Thought: Since the Dow has experienced an impressive 835-point bounce from critical support in just 10 days, the index is due for a retracement. And while a retracement may occur, this does not mean the Dow is done heading higher. This retracement could be fuel for another round of strength ahead.

Let’s see how this turns out!

Have any thoughts you’d like to share? Comment away!

Cheers!

Frank Ochoa
PivotBoss.com

Follow Frank on Twitter: http://twitter.com/PivotBoss

A 400 Point Drop is Brewing for the Dow

The Dow may be headed for another test at 9,800. Today’s mid-day reversal from resistance at 10,325 all but sealed the deal for another key test at critical support. Here’s why…

The Dow Jones Industrial Average opened the day with early strength today, but found major resistance at 10,325, which has held the last four weeks. The last time the Dow reversed from this level happened two weeks ago, sparking a move to 9,757.

However, the initial reaction to 10,325 was much more apparent this time around, as the index formed a highly bearish candlestick pattern; a shooting star to be precise. This pattern formed precisely at the bottom of the central pivot range, which is considered resistance during an established down trend.

This is the foundation of pivot trend analysis.

During a bullish trending market, bulls will look to “buy the dips” at the pivot range, as this area is considered support. During a bearish trend, however, bears look to “sell the rips” at the pivot range, which is considered resistance. This is what we are currently seeing at the moment.

The Dow experienced heavy selling pressure at the pivot range earlier in the month as well, which indicates we will likely see the same type of result this time around, especially if a confirmed close occurs below today’s low price of 10,185. Therefore, 9,800 could be a real possibility by week’s end.

If 9,750 is taken out, grab a hard hat!

What are your thoughts?

If you want to learn more about the pivot range read “A Quick Guide to the Pivot Range” in our Education section.

Cheers!

Frank Ochoa
PivotBoss.com

Follow Frank on Twitter: http://twitter.com/PivotBoss

A Quick Guide to the Pivot Range

The Central Pivot Range (CPR) is one of the most versatile price-based indicators available to traders.  This versatility makes this indicator a mainstay in my trading arsenal.

Some authors have called the pivot range the “meat of the market”, while others refer to the central pivot point as the “heartbeat of the indicator”.  In my opinion, the central pivot range is the Swiss Army Knife of pivots.  At any given time, the range can be support or resistance, it can forecast trending or sideways price behavior, dictate the day’s direction, or serve as an integral part of a trend.
Like the Moon, the central pivot range controls the tides of the market.

I was first introduced to the pivot range through Mark Fisher’s book The Logical Trader.  He explains the pivot range concept in great detail and illustrates how he combines the range with his ACD Method to profit in the market.  While he only uses the outermost boundaries of the range, I prefer to include the central pivot point to add another dimension to the indicator.  The Pivot Range formula is below; where TC is the top central pivot, BC is the bottom central pivot, and Pivot is the central pivot point:

TC = (Pivot – BC) + Pivot
Pivot = (High + Low + Close)/3
BC = (High + Low)/2

Keep in mind that depending on the market’s behavior, the formula for TC may in fact create the level for BC, and vice versa.  I always refer to the highest level as TC, and the lowest level as BC, regardless of which formula led to the level’s creation.

The pivot range can be used in addition to other price-based indicators, or as a standalone indicator.  What makes the range fascinating is that it allows you to analyze the market in a variety of ways, including pivot width analysis, two-day pivot analysis, and pivot trend analysis.

Take a look at this 15-minute chart of Google, Inc. (ticker: GOOG).  Notice that during a recent uptrend in price, the pivot range served as support throughout the advance.  This is the foundation of pivot trend analysis.  Each pull-back to the pivot range during this advance became a perfect “buy the dip” opportunity, which is where smart money traders are putting their assets to work.  Of course, this is just one way to use the indicator.  I will explore more uses in future blog posts.

Knowing the location of the pivot range at all times allows you to keep your finger on the pulse of the market and provides you with a significant trading edge.  In trading, an edge is all you need to make money.

Frank Ochoa
PivotBoss.com

Follow Frank on Twitter: http://twitter.com/PivotBoss