Here’s how you could have traded Amazon (AMZN) today — with nearly pinpoint accuracy. (July 19, 2018)AMZN
In this video we are going to look at pivot points and volume-weighted average price. Yesterday we had a training session where I looked at some of these, frankly because the market was actually kind of sluggish; there wasn’t a whole lot to do. Some people made a little bit of money but I am not pounding the table on anything because some days you go out fishing and the fish aren’t really biting. But, this trading today on Amazon ( NASDAQ: AMZN ), really is a great opportunity for me to show you how this stuff works.
Pivot points are based on the high, the low, and the close on any given day. You add those up, divide by 3 and that is your pivot point. Or, if you really want to be anal retentive you can do the OPEN, the close, the high, and the low; add those together and divide by 4, but you are not going to really get that much difference. Typically it is just the high-low-close added together, divide by 3, that’s your pivot point. And then the first level of resistance, second, and third level of resistance, they come from the multiples on the pivot point and then the same thing on the support.
The idea is that on any given day when a stock starts to fall, well, where is support? Well, where is S1? Here it was 1829.00. Where is S2? It was 1816.00. Where is S3? Clear down here at basically 1800.00, right? And so the idea is, as the stock is going down you are going to buy at a support level and then cross your fingers and hope that support holds. If it doesn’t hold then you ditch that thing and then wait for the next level of support to be tested and you hope that it didn’t hold at the first level of support. Maybe the second level of support will work, and then etcetera, etcetera.
The same type thing on the reverse. When a stock is moving up; Well, I shorted the stock and I am getting the crap kicked out of me. Where do I think the stock is going to peak? Well, let’s look and see where R1 is, etcetera, etcetera. Or, I am long this stock. Where do I think sellers are going to be so that I should at least raise my stop or sell there myself? Where should I sell? R1 is at 1857.00 so maybe I won’t sell at 1850.00, maybe I will sell at 1857.00. So these things really work.
Today’s trading is a great example of that. The stock gapped down in the morning, essentially opened right at the first level of support. The pivot point here was at 1844.00. The stock gapped down right out of the chutes and hit the first level of support; rallies up. This, whatever color line you want to call it, orange, yellow, clay, I don’t know, this one, that’s the average price on a volume-weighted basis. So this kind of starts to play in here.
The stock rebounded of off S1; those guys who bought are happy. Right around here volume-weighted average price kicks in and what happens? The stock comes back and once again rebounds off of S1. These aren’t going to be perfect; you can see this. You don’t get to trade that technically. Otherwise, all you would need is a ruler and a pencil and you can make a million bucks.
Then finally the third time the stock comes down here. By the way, it is noontime when everybody is out getting juiced up waiting for the weekend. “Oh, the stock is back here, I think I’ll buy. I missed this one but by golly, I am not going to miss this one.” So you are the guy that is sitting at your desk waiting to buy here; that didn’t work out too well. So you are holding the stock and you are getting stopped out. Or, you are just going to be stubborn because you think the stock is going to rally. And then finally it comes down to here, you sell and then what happens? The stock comes down and bounces off of S2 and then does what it does.
Knowing you, you are buying up here and it comes down here and you sell again. It bounces off of S2. Where does it go to? Right up to S1; prior support once broken becomes new resistance. Volume-weighted average price, also resistance. The stock is below the VWAP, you want to be selling when it hits the VWAP. The stock is above the VWAP, you want to be buying when it pulls back to the VWAP. What I am telling you is, this stock, today, traded really, really technically if you are looking at these pivot points; buy, buy, oops, buy, buy, sell, sell, buy, oops, oh crap! Right back up here and the VWAP all the way down.
I use TC2000 for these videos. All of your software has these pivot points on them. I am just telling you, you want to use these things; use them in making your entries and exits. I don’t care if you are a long-term investor you are going to make more money if you just trade with more precision and they can help you out.