Episodic pivots | stockbee


Episodic pivots

Out of all the methods I use, the most effective and highly profitable one is episodic pivots. As it usually happens, methods evolve over a period of time. Earnings lead breakout was my most profitable method for many years. Focusing on it exclusively had me missing out on some non earnings lead ideas. The episodic pivots method eliminates that problem as it looks at all stocks reacting to new piece of information.

If you look at the 289 stocks in the 100% plus in 260 days list, you will notice 268 out of them had one or more episodic pivots at the beginning of their move. Similarly if you analyse the IBD 200 list, 173 out of the list had an episodic pivots in first one third of their move.

One of the advantage of the method is extremely low number of stocks one needs to focus on , on a daily basis. It is extremely easy to research 10 to 20 stocks on a daily basis. Also out of those stocks I only focus on those which had Episodic Pivots for the first time in last six months. I also focus on stocks where the Episodic Pivot is at beginning of the move.

Typically some stocks come on the scan early morning and one can research them and enter immediately and then fresh set of them come in later. The stocks in this scan also are good for later entries and pyramiding.


prux said...

Pradeep, nice post on episodic pivots - in the earnings driven episodic pivot, when do you decide that the move is late in the game? For example, GES, WFR have been having stellar earnings for the last 12+ months. At what stage do you decide that the stock is late in its move? With respect to WFR - only recently, it started a fresh up move. when is it too late to buy episodic pivots?

thanks for the good work!

Pradeep Bonde said...

Earlier in a price move better it is. That is why on earnings I am more interested in first earning acceleration or second on a stock which has had no significant price acceleration prior to earnings. . In such cases you get the market reacting to that event vigorously and also the effect lasts and price go up as market participants factor in that "new" information.
Similarly Episodic Pivots at begining of move are more valuable than later. Say first Episodic Pivot in 2 years or first time in life of a stock.
But in a momentum driven markets, Episodic Pivots also happen very late and often lead to blowout moves. But here again the prior price action before Episodic Pivots become more important. Hence I use 65 day weakness in price to pick stocks from the Episodic Pivot list on stocks like GES, WFR etc.
In short there is no simple answer to it, but as you trade it over time, you get better at picking the right ones and avoiding the duds.
Simplest way to manage the duds is to use very tight time stop. The stock should move immediately (within 5 days) after Episodic Pivot, otherwise you go on to next opportunity.

James said...

Thanks for the insight on this last comment :-)