Pivot Points on MFE

Over the weekend I showed you how I selected MFE to trade following my system. However, as stocks jump in high volume, they may pullback somewhat before continuing the new trend. Occassionally, the new trend fizzles, depending on market conditions, so rushing in sometimes is not the best policy.

I have been using the Pivot Point technique to try to avoid strong reversals and confim that a new trend is in place, and that I have not pick the stock at the wrong time. I have talked about the Pivot points before, but if you'd like to get the Excel spread sheet with the calculations, please send me an e-mail (PaperProfit1@mac.com).

The chart below shows the Pivot point, resistance 1 and support 1. As you can see, the stock has already pullback, approaching the Support point (I call this wave A). Today, the stock is rallying, closing in on the resistance 1. This would be wave B. In an Elliott wave theory, corrections are formed by 3 waves we would call ABC or WXY. In either case, we should expect a third wave to go down to test support 1 again. Ideally, Support 1 would be at least touched, or even crossed. That would be our C wave. Once C wave is complete, we could see if the stochastics oscillator is once again giving us a "go ahead" sign. Once support 1 is crossed to the downside, our BUY signal would be a cross over the Pivot point.

So look carefully for wave C to complete and then get ready to enter, if your favorite oscillator (60 min chart) gives you a bonafide BUY signal. BUT BEWARE, if the stock continues to deteriorate and go down to the Support 2, then you MUST cuestion your assumptions about MFE and reanalyze using Elliott wave and/or conventional Technical analyisis.

If wave C does not materilize, and instead Resistance 1 is broker, then Resistance 2 would be our top point, and wave C should go down to the Pivot point, not the support 1 anymore. At that point we will be looking for another Buy signal. In other words, if we MUST raise the B wave to Resistance 2, the we MUST also raise wav C to the Pivot point. This would be a more bullish scenario.