Identifying when a change in trend is occurring is one of the most important skills a trader can learn. There are several methods that can be used to identify a possible change in trend; however, one of the easiest to spot is the emergence of a new pivot point. While identifying a pivot must always be done in hindsight, one can examine clues on a chart to determine whether the probability of forming a new pivot is high. One technique is to watch for a partial retrace after a trading range has been established.
When a stock refuses to honor an established range, it usually reverses to break the trading range in the opposite direction, thus establishing a new pivot point. By picking a bottom, a trader can benefit by getting in early on a new trend. In this article we will discuss concepts from a long (uptrend) perspective and using stocks as the financial instrument. For shorting, apply the same concepts in reverse. These concepts will work for any instrument that can be charted, as...
