Pocket pivot: meaning, rules and how to scan for it

A pocket pivot is an up day that shows unusually strong buying: price rises on volume greater than any down-day volume of the previous ten sessions. Traders look for it inside a base, before a classic breakout.

Watch the Popular Scans in the scanner (Hindi, from 8:51).

The rule

• The stock closes higher on the day.
• Volume is larger than the largest down-day volume of the previous ten sessions.
• It happens near or above a rising moving average, often the 10- or 50-day.

The idea, from traders Chris Kacher and Gil Morales, is that heavy buying can appear in the “pocket” of a base before price clears the pivot.

Pocket pivot versus breakout

A breakout needs price to clear a prior high, usually on heavy volume. A pocket pivot can occur lower down, inside or just under a base, so it is earlier but lacks the confirmation of a breakout. Both can fail.

Scanning for it

The swing trading screener includes a pocket pivot screen. Combine it with RS and the stage so you are looking at stocks in uptrends rather than rallies inside downtrends.

Limits

One heavy up day can be a one-off or news-driven. Check the surrounding chart, the sector, and the market’s trend.

A worked example

In the last ten days, the largest down-day volume on a stock was 1.2 million shares. Today the stock closes up 2.5% on 1.6 million shares, just above its 50-day average. That is a pocket pivot. Because it sits inside a base, the stock has not yet broken out, so the evidence is early and the risk is higher than after a breakout.

Strategy examples

These are illustrative rule sets that show how the scanner can be used. They are not recommendations or advice, the numbers are examples, and rules like these can lose money. Test any idea on your own and manage risk before acting.

Early entry inside a base

1. Run the pocket pivot screen on stocks with RS 80 or higher.
2. Confirm the stock is in Stage 2 and the base is tight.
3. Use a stop below the base low or the 50-day average.
4. Keep position size small because the entry is early.

Pullback to the 10-day average

1. Look for stocks pulling back to the 10-day average inside an uptrend.
2. Watch for a pocket pivot day as price turns up.
3. Combine with market breadth.

Combine with a breakout

1. Wait for a pocket pivot, then for the breakout above the pivot.
2. Add only if the breakout also has strong volume.
3. This waits longer but gives more confirmation.

Common mistakes

• Treating any high-volume up day as a pocket pivot.
• Using it on stocks in downtrends.
• Ignoring the market.
• Making the position too large for an early, riskier signal.

Frequently asked questions

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