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

5.4. POCKET PIVOTS AND STANDARD BREAKOUT BUY POINTS

Sometimes a pocket pivot will coincide with a standard new-high base breakout buy point, a classic O'Neil "pivot point." If the pocket pivot coincides with a base breakout, then volume does not have to be at least as great as the down-volume day over the previous 10 days, but should be acceptable breakout volume. In the example of Baidu, Inc. (BIDU) in Figure 5.4, we can see that the volume on the new-high breakout of September 4, 2007, which is also a pocket pivot point by definition, was the highest over the prior 10 days, but would not have to be if the volume on the breakout is of sufficient magnitude required for any standard new-high, pivot point type of breakout buy point. In this case, the volume on the breakout was 39 percent above average, when you would normally want to see volume come in at 50 percent above average or more. However, given the "pocket pivot" rule where volume on the pocket pivot only needs to be the highest compared to any down-volume day over the prior 10 days, this breakout was actually buyable as a "pocket pivot," even though a 39 percent volume increase is not necessarily preferable on a standard pivot point breakout. BIDU's base on this breakout was "V-shaped" and somewhat volatile due to the general market sell-off at the time, but the stock did hold its 50-day moving average after dipping below it for two days in mid-August. The stock then set up again above the 50-day, 20-day, and 10-day moving ...