Trade Like an O'Neil Disciple

Gap-ups can be bought at the beginning of the trading day, since the

strongest names will often continue higher that same day after they gap-up,

This is one basic rule of gap-up breakouts—they

negate or “exonerate” any negative or weak action in the base

“violation” is defined as a close below the 10-day moving average followed by a move on the next day below the intraday low of the first day.

pocket

pivot points in a downtrend should simply be ignored.

IMPROPER OR “DO NOT BUY” POCKET

PIVOT POINTS

Paying close attention to the “context” of the pocket pivot by looking for constructive action in the pattern, such as very tight, sideways movement, leading up to the pocket pivot also helps one to determine when the rules can be bent just a little bit as a “discretionary”

pocket pivot buy point is exercised as we saw in Figure 5.28.

a stock

“obeying” or “respecting” its 10-day moving average as it trends higher

CONTINUATION POCKET PIVOTS: USING

THE 10-DAY MOVING AVERAGE

a double-bottom

bottoming formation, not to be confused with a “double-bottom” chart base

formation, which is formed as part of a stock’s overall uptrend during a

price advance.

classic “bursting” type of

pocket pivot buy point that occurs as the stock bounces up off the 50-day

moving average and through the 10-day and 20-day moving averages on a

big spike in volume and one that is also greater than any down-volume in

the pattern over the prior 10 days,