Integrate Pivot Points

INTEGRATE PIVOT POINTS TO HELP TIME OUR EXITS?     

We have gone over how to move the stops and why it is good to scale out of positions. We can integrate pivot points to help us trigger our entries and use the pivot point support or resistance levels to help us target our exits. As shown in Figure 10.4, we have a 15-minute candle chart showing a classic sell signal with a low close doji at pivot resistance, and we see how the moving averages have crossed and the market is trading below both values.

We have a call to action to sell on the close or on the next open. This chart is the e-mini-Standard & Poor’s (S&P), and we would be filled at 1264.25. The market declines in the perfect order—lower highs, lower lows, and lower closing lows—right until we see the market trade down to the pivot support target. This is a perfect opportunity to scale out of half of your positions. Remember that in Chapter 2 we went over the fact that once a market goes into trend mode, it will then go into a consolidation phase. We do not know if the trend will continue or reverse; so at this point, it makes sense to trail a stop on the balance of positions.

I use the point just above the last conditional change, which is the candle that made the last lower closing low. We cover half of the positions at 1260.75 for a 3.5-point gain, or $175 per contract. We would lower our stops on the balance to 1262.25 to lock in profits on the balance of positions. Using the pivot point target levels will help you identify when and where to scale out of positions.