Power to the Pivot

Hi Andrew,
Pat made this video for you:  https://youtu.be/47Pubh4VHtk

Key Points from the Video:

1. Analysis of QQQ and SPY:
   • On October 4th, QQQ bounced off the ADMA and closed high on that day, indicating a potential continuation of the bounce the next day.
   • SPY showed similar behavior, bouncing off the AMA on the same day.
2. Volume Observations:
   • A key observation was the lack of significant volume on October 4th during the upward movements of the indices, which Pat notes as a concern for confirming the strength of the move.
3. Individual Stock Analysis:
   • Hood (Robinhood Markets Inc.): Highlighted a long base formation resembling a cup and handle, which caught attention due to a pickup in volume that indicated a potential breakout.
   • Best Buy (BBY): Pat discussed observing the stock's movement, noting its long cup and handle base, and emphasized the importance of volume in confirming any potential breakout.
4. Trading Strategy Emphasis:
   • Pat emphasizes the importance of clean and simple base breakouts for trading, discussing how a flat base across several stocks indicated potential buy points if accompanied by volume.
   • Specific dates such as October 8th were noted where stocks showed movements indicating breakouts from these bases.
5. Educational Tips:
   • The importance of correlating individual stock actions with overall market movements was discussed to ensure that trading decisions are made in the context of broader market trends.
   • Pat advises focusing on simple base entries as they are easier to identify and typically offer safer trading setups.
6. Response to Market Conditions:
   • He detailed how market conditions could affect stock movements, noting how even with good setups, the broader market conditions must also be conducive for successful trades.

Key Points Covered:

1. Importance of Simple Bases: Pat emphasizes the significance of simple, flat bases as they are easy to identify and generally lead to predictable outcomes. He demonstrates using several stock charts, such as IOT, Cava, and Best Buy, highlighting the clean tops of these patterns and how they serve as reliable indicators for potential breakouts.
2. Volume Confirmation: A critical aspect of validating a breakout from a flat base is observing an accompanying volume increase. Pat points out specific instances where volume surged as prices pushed through resistance levels, confirming the strength and potential sustainability of the breakout.
3. Pattern Recognition Training: Pat recommends backtracking charts to before their breakout points as a training method to sharpen the ability to spot flat bases. This practice helps traders train their eyes to recognize these patterns early and act swiftly.
4. Managing Entries and Exits: Effective trade management involves knowing when to enter based on the breakout of a base and, importantly, when to exit. Pat discusses the strategy of selling into strength and the necessity of not letting a significant profit turn into a loss.
5. Flexibility and Subjectivity: While chart analysis can be systematic, Pat acknowledges the subjective nature of interpreting chart patterns. He advises maintaining flexibility in expectations and not overthinking the setups, focusing instead on clear, observable patterns that have historically led to profitable trades.
6. Risk Management: Throughout the video, Pat underscores the importance of stringent discipline in both buying and selling as essential for controlling risk and minimizing potential losses. He stresses that successful trading is not just about recognizing patterns but also about managing positions prudently.