Trade Like an O'Neil Disciple: How We Made 18,000% in the Stock Market

5.1. DR. K'S LABORATORY: THE POCKET PIVOT ADVANTAGE

In the O'Neil literature you will find many references to new-high "pivot point" buy points, as well as trend line and moving average breakouts, but you will not find any definition of "pocket pivot" buy points. This is because the concept of the "pocket pivot," essentially an early buy point relative to traditional O'Neil techniques, did not exist until it was discovered in Dr. K's Laboratory in 2005 as a result of research studies that were performed for the express purpose of finding a solution to the flattish, compressed, and somewhat sideways moving markets of the mid-2000s (see S&P 500 weekly chart from 2004–2005). Such markets contrast with the more strongly trending market environments seen in the 1980s and 1990s. In simple terms, a "pocket pivot," or "buying in the pocket," is an early base breakout indicator, which is designed to find buyable pivot points within a stock's base shortly before the stock actually breaks out of its chart base or consolidation and emerges into new high price ground.

Having met and talked with a broad range of institutional investors through our affiliation with William J. O'Neil + Company's institutional services department as well as at the workshops we presented at for the company, we gained a distinct and unique appreciation for the fact that institutional investors, such as hedge funds, mutual funds, and pension funds, do not like to buy breakouts to new highs. In fact, they generally ...