From the November 01, 2012 issue of Futures Magazine • Subscribe!

Trading stocks with Camarilla pivots

Scenario 2: Camarilla pivot points also are useful in identifying breakout trades. If price breaks beyond Resistance 4 or Support 4, a trade with the trend rather than a reversion trade is signaled. For example, a long trade is set up when price opens between Resistance 3 and Resistance 4. We will buy if price continues above Resistance 4, with profit targets at Resistance 5 and Resistance 6 and a stop loss placed five ticks below Resistance 3.

We can demonstrate with Apple. On Feb. 13, Apple had the following: Open, 499.74; high, 503.83; low, 497.09; close, 502.60. Given these values, our Camarilla pivot point resistance levels are: 

  • R3 = 504.45; R4 = 506.31; R5 = 508.47; R6 = 509.41 

So, our breakout strategy for Feb. 14 is to buy at 506.31 with profit targets at 508.47 and 509.41. Our initial stop loss will be five ticks below R3, or 504.40. It played out, as Apple opened at 504.5 — between R3 and R4 — with the trade triggered at 3:35 p.m., after which Apple achieved the first profit target at 508.47 three (five-minute) bars later and the second profit target immediately after that (see “Measure of a breakout,” below).

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