In a Trader’s Exclusive Archived Trading Education Webinar conducted by Rob Booker he talked about how Missed Pivots can identify:

  1. A new trend
  2. A profit target
  3. A Stop-loss point
  4. A trend reversal

He suggests you can scan the markets for financial instruments that have missed their weekly pivot and you can find those that are ready to trend reverse.

He suggests using a 15-minute chart to chart weekly missed pivots and he will give it 2 weeks for the price to get back to that missed pivot.

As an example, if AAPL misses it’s weekly pivot (as shown), then the very next Monday you will execute a trade at the open price, based on the probability that it will move back towards that missed pivot.  In this case, he would seel the stock or sell the option.

missed pivot

 

AAPL will probably not get all the way back to the missed pivot. But, it has a high probability of making it half the distance.

The plan here is to stay in the trade for two weeks with a profit target of a 50% retracement. If it doesn’t work within two weeks, we’re going to close the trade. This is a time-based stop, not a price-based stop. This is aimed at avoiding getting shaken out of the market.

In the following chart , AAPL misses 2 weekly pivots in a row. It doesn’t matter if it even missed by a penny. So, at the end of the first week, we would buy AAPL (at $536, circled in red).

It goes on to go down at the open of the week, then moves up. But, it doesn’t make half the distance as expected.

missed pivot 2

What do we do? We buy again on the second Monday after it has missed the pivot point for a second time (see red circle lower right) and we’re going to have as the target the half-way point from the original missed pivot (end of red arrow at right).

missed pivot 3

 

Instead of weekly pivots, you can also try daily pivots with a stop period of 2 daily or monthly pivots with a stop period of 2 months.

Drawdowns are a factor in this trading system (perhaps 5-10%) before the trade may become a winner. You have to stay with the trade.