Trader’s Expo 2012
Queen Elizabeth II Conference Centre
London
March 23, 2012
Dr. Chris Kacher
Managing Director
Virtue of Selfish Investing, LLC
www.selfishinvesting.com
www.mokainvestors.com
Chart Notes
Moving Averages:
Magenta = 10-day simple moving average.
Green = 20-day simple moving average.
Blue = 50-day simple moving average.
Black = 65-day exponential moving average.
All charts courtesy of
HighGrowthStock Investor
and
eSignal, Inc.
What is a “Pocket Pivot?”
• An early buy point within a potential leading stock’s
consolidation or basing pattern. When utilized as a
buy point within a consolidation or base it provides an
“early mover” advantage to the investor.
• A continuation buy point for a leading stock that is
already firmly entrenched in a strong uptrend. This
offers both a way to get “onboard” strong leaders later
on in their uptrends as well as an extremely reliable
and powerful tool for adding to positions purchased
earlier when a stock was still within or just emerging
from its original consolidation or basing formation.
Pocket Pivots are Unique Buy Points
Basic Premise of the Pocket Pivot
Institutional Buying creates new-high base breakouts, but
we also know that institutional buying occurs within
consolidations and during uptrends.
This buying within consolidations and uptrends should,
theoretically, have its particular, identifying price and
volume “signature.”
The pocket pivot describes that “signature,” and provides a
clear, buyable “pivot point,” or “pocket pivot buy point.”
Pocket pivots also provide a tool for buying leading
stocks as they progress higher within uptrends,
extended from a prior base or price consolidation.
Pocket pivots are just a way to identify
institutional investors’ footprints within a base or an uptrend.
The Ten Commandments of Pocket Pivots
1. As with base breakouts, proper pocket pivots should emerge within or out of constructive basing
patterns.
2. The stock's fundamentals should be strong, i.e., excellent earnings, sales, pretax margins, ROE, strong
leader in its space, etc. or should have a compelling thematic basis for consideration.
3. The day's volume should be larger than the highest down volume day over the prior 10 days.
4. Pocket pivots sometimes coincide with base breakouts or with gap ups. This can be thought of as
added upside power should this occur.
5. If the pocket pivot occurs in an uptrend after the stock has broken out, it should act constructively
around its 10-dma. It can undercut its 10-dma as long as it shows resilience by showing volume that is
greater than the highest down volume day over the prior 10 days.
6. Some pocket pivots may occur after the stock is extended from the base. If the pivot occurs right near
its 10-dma, it can be bought, otherwise it is extended and should be avoided. Give the 10-dma the
chance to catch up to the stock, where the stock would consolidate for a few days, before buying such
a pocket pivot.
7. Do not buy pocket pivots if the overall chart formation is in a multi-month downtrend (5 months or
longer). It is best to wait for the rounding part of the base to form before buying.
8. Do not buy pocket pivots if the stock is under a critical moving average such as the 50-dma or 200-
dma. If well under its 50-dma, and getting support near the 200-dma, it can be bought provided the
base is constructive.
9. Do not buy pocket pivots if the stock formed a 'V' where it sells off hard down through the 10-dma or
50-dma then shoots straight back up in a 'V' formation. Such formations are failure prone.
10. Avoid buying pocket pivots that occur after wedging patterns.
The Ten Commandments of Pocket Pivots
1. As with base breakouts, proper pocket pivots should emerge within or out of constructive basing
patterns.
2. The stock's fundamentals should be strong, i.e., excellent earnings, sales, pretax margins, ROE, strong
leader in its space, etc. or should have a compelling thematic basis for consideration.
3. The day's volume should be larger than the highest down volume day over the prior 10 days.
4. Pocket pivots sometimes coincide with base breakouts or with gap ups. This can be thought of as
added upside power should this occur.
5. If the pocket pivot occurs in an uptrend after the stock has broken out, it should act constructively
around its 10-dma. It can undercut its 10-dma as long as it shows resilience by showing volume that is
greater than the highest down volume day over the prior 10 days.
6. Some pocket pivots may occur after the stock is extended from the base. If the pivot occurs right near
its 10-dma, it can be bought, otherwise it is extended and should be avoided. Give the 10-dma the
chance to catch up to the stock, where the stock would consolidate for a few days, before buying such
a pocket pivot.
7. Do not buy pocket pivots if the overall chart formation is in a multi-month downtrend (5 months or
longer). It is best to wait for the rounding part of the base to form before buying.
8. Do not buy pocket pivots if the stock is under a critical moving average such as the 50-dma or 200-
dma. If well under its 50-dma, and getting support near the 200-dma, it can be bought provided the
base is constructive.
9. Do not buy pocket pivots if the stock formed a 'V' where it sells off hard down through the 10-dma or
50-dma then shoots straight back up in a 'V' formation. Such formations are failure prone.
10. Avoid buying pocket pivots that occur after wedging patterns.
Chipotle Mexican Grill (CMG) – 2010
Molycorp, Inc. (MCP) – 2010
Molycorp, Inc. (MCP) - 2011
Youku.com, Inc. (YOKU) - 2011
iShares Silver Trust (SLV) – 2010
The Ten Commandments of Pocket Pivots
1. As with base breakouts, proper pocket pivots should emerge within or out of constructive basing
patterns.
2. The stock's fundamentals should be strong, i.e., excellent earnings, sales, pretax margins, ROE, strong
leader in its space, etc. or should have a compelling thematic basis for consideration.
3. The day's volume should be larger than the highest down volume day over the prior 10 days.
4. Pocket pivots sometimes coincide with base breakouts or with gap ups. This can be thought of as
added upside power should this occur.
5. If the pocket pivot occurs in an uptrend after the stock has broken out, it should act constructively
around its 10-dma. It can undercut its 10-dma as long as it shows resilience by showing volume that is
greater than the highest down volume day over the prior 10 days.
6. Some pocket pivots may occur after the stock is extended from the base. If the pivot occurs right near
its 10-dma, it can be bought, otherwise it is extended and should be avoided. Give the 10-dma the
chance to catch up to the stock, where the stock would consolidate for a few days, before buying such
a pocket pivot.
7. Do not buy pocket pivots if the overall chart formation is in a multi-month downtrend (5 months or
longer). It is best to wait for the rounding part of the base to form before buying.
8. Do not buy pocket pivots if the stock is under a critical moving average such as the 50-dma or 200-
dma. If well under its 50-dma, and getting support near the 200-dma, it can be bought provided the
base is constructive.
9. Do not buy pocket pivots if the stock formed a 'V' where it sells off hard down through the 10-dma or
50-dma then shoots straight back up in a 'V' formation. Such formations are failure prone.
10. Avoid buying pocket pivots that occur after wedging patterns.
Lululemon Athletica (LULU) - 2010
Riverbed Technologies (RVBD) July 2010
The Ten Commandments of Pocket Pivots
1. As with base breakouts, proper pocket pivots should emerge within or out of constructive basing
patterns.
2. The stock's fundamentals should be strong, i.e., excellent earnings, sales, pretax margins, ROE, strong
leader in its space, etc. or should have a compelling thematic basis for consideration.
3. The day's volume should be larger than the highest down volume day over the prior 10 days.
4. Pocket pivots sometimes coincide with base breakouts or with gap ups. This can be thought of as
added upside power should this occur.
5. If the pocket pivot occurs in an uptrend after the stock has broken out, it should act constructively
around its 10-dma. It can undercut its 10-dma as long as it shows resilience by showing volume that is
greater than the highest down volume day over the prior 10 days.
6. Some pocket pivots may occur after the stock is extended from the base. If the pivot occurs right near
its 10-dma, it can be bought, otherwise it is extended and should be avoided. Give the 10-dma the
chance to catch up to the stock, where the stock would consolidate for a few days, before buying such
a pocket pivot.
7. Do not buy pocket pivots if the overall chart formation is in a multi-month downtrend (5 months or
longer). It is best to wait for the rounding part of the base to form before buying.
8. Do not buy pocket pivots if the stock is under a critical moving average such as the 50-dma or 200-
dma. If well under its 50-dma, and getting support near the 200-dma, it can be bought provided the
base is constructive.
9. Do not buy pocket pivots if the stock formed a 'V' where it sells off hard down through the 10-dma or
50-dma then shoots straight back up in a 'V' formation. Such formations are failure prone.
10. Avoid buying pocket pivots that occur after wedging patterns.
Coffee Holding Company, Inc. (JVA) - 2011
The Ten Commandments of Pocket Pivots
1. As with base breakouts, proper pocket pivots should emerge within or out of constructive basing
patterns.
2. The stock's fundamentals should be strong, i.e., excellent earnings, sales, pretax margins, ROE, strong
leader in its space, etc. or should have a compelling thematic basis for consideration.
3. The day's volume should be larger than the highest down volume day over the prior 10 days.
4. Pocket pivots sometimes coincide with base breakouts or with gap ups. This can be thought of as
added upside power should this occur.
5. If the pocket pivot occurs in an uptrend after the stock has broken out, it should act constructively
around its 10-dma. It can undercut its 10-dma as long as it shows resilience by showing volume that is
greater than the highest down volume day over the prior 10 days.
6. Some pocket pivots may occur after the stock is extended from the base. If the pivot occurs right near
its 10-dma, it can be bought, otherwise it is extended and should be avoided. Give the 10-dma the
chance to catch up to the stock, where the stock would consolidate for a few days, before buying such
a pocket pivot.
7. Do not buy pocket pivots if the overall chart formation is in a multi-month downtrend (5 months or
longer). It is best to wait for the rounding part of the base to form before buying.
8. Do not buy pocket pivots if the stock is under a critical moving average such as the 50-dma or 200-
dma. If well under its 50-dma, and getting support near the 200-dma, it can be bought provided the
base is constructive.
9. Do not buy pocket pivots if the stock formed a 'V' where it sells off hard down through the 10-dma or
50-dma then shoots straight back up in a 'V' formation. Such formations are failure prone.
10. Avoid buying pocket pivots that occur after wedging patterns.
Baidu, Inc. (BIDU) - 2011
The Ten Commandments of Pocket Pivots
1. As with base breakouts, proper pocket pivots should emerge within or out of constructive basing
patterns.
2. The stock's fundamentals should be strong, i.e., excellent earnings, sales, pretax margins, ROE, strong
leader in its space, etc. or should have a compelling thematic basis for consideration.
3. The day's volume should be larger than the highest down volume day over the prior 10 days.
4. Pocket pivots sometimes coincide with base breakouts or with gap ups. This can be thought of as
added upside power should this occur.
5. If the pocket pivot occurs in an uptrend after the stock has broken out, it should act constructively
around its 10-dma. It can undercut its 10-dma as long as it shows resilience by showing volume that is
greater than the highest down volume day over the prior 10 days.
6. Some pocket pivots may occur after the stock is extended from the base. If the pivot occurs right near
its 10-dma, it can be bought, otherwise it is extended and should be avoided. Give the 10-dma the
chance to catch up to the stock, where the stock would consolidate for a few days, before buying such
a pocket pivot.
7. Do not buy pocket pivots if the overall chart formation is in a multi-month downtrend (5 months or
longer). It is best to wait for the rounding part of the base to form before buying.
8. Do not buy pocket pivots if the stock is under a critical moving average such as the 50-dma or 200-
dma. If well under its 50-dma, and getting support near the 200-dma, it can be bought provided the
base is constructive.
9. Do not buy pocket pivots if the stock formed a 'V' where it sells off hard down through the 10-dma or
50-dma then shoots straight back up in a 'V' formation. Such formations are failure prone.
10. Avoid buying pocket pivots that occur after wedging patterns.
Lululemon Athletica, Inc. (LULU) - 2011
Amazon.com (AMZN) - 2008
The Ten Commandments of Pocket Pivots
1. As with base breakouts, proper pocket pivots should emerge within or out of constructive basing
patterns.
2. The stock's fundamentals should be strong, i.e., excellent earnings, sales, pretax margins, ROE, strong
leader in its space, etc. or should have a compelling thematic basis for consideration.
3. The day's volume should be larger than the highest down volume day over the prior 10 days.
4. Pocket pivots sometimes coincide with base breakouts or with gap ups. This can be thought of as
added upside power should this occur.
5. If the pocket pivot occurs in an uptrend after the stock has broken out, it should act constructively
around its 10-dma. It can undercut its 10-dma as long as it shows resilience by showing volume that is
greater than the highest down volume day over the prior 10 days.
6. Some pocket pivots may occur after the stock is extended from the base. If the pivot occurs right near
its 10-dma, it can be bought, otherwise it is extended and should be avoided. Give the 10-dma the
chance to catch up to the stock, where the stock would consolidate for a few days, before buying such
a pocket pivot.
7. Do not buy pocket pivots if the overall chart formation is in a multi-month downtrend (5 months or
longer). It is best to wait for the rounding part of the base to form before buying.
8. Do not buy pocket pivots if the stock is under a critical moving average such as the 50-dma or 200-
dma. If well under its 50-dma, and getting support near the 200-dma, it can be bought provided the
base is constructive.
9. Do not buy pocket pivots if the stock formed a 'V' where it sells off hard down through the 10-dma or
50-dma then shoots straight back up in a 'V' formation. Such formations are failure prone.
10. Avoid buying pocket pivots that occur after wedging patterns.
Carpenter Technology Corp. (CRS) - 2008
“Bottom-Fishing” Pocket Pivot
Buy Point Examples
Google, Inc. (GOOG) - 2010
Intuitive Surgical, Inc. (ISRG) – 2009
Summary
Pocket pivots function as early buy points within a base or
as continuation buy points once a stock is extended from a
prior base breakout.
Pocket pivots are often strong clues during market
corrections when they occur within the base or
consolidation of a potential leader just before a market
bottom and new rally phase.
Pocket pivots are not a panacea, but they do offer an edge
in today’s markets. Proper risk management must always
be employed. basing formation.
Download today’s presentation at
www.SelfishInvesting.com
Investor Education section:
http://www.SelfishInvesting.com/faqs
Buyable Gap Ups
Gap-up Moves Usually Look too “Crazy” to Buy
But Often One Would be “Crazy” Not to Buy Them.
Why Buyable Gap-Ups Work
When a stock gaps up on tremendous volume, the
“argument” has been won decisively by buyers.
The power or “decisiveness” with which this argument
is won is characterized by sharp upside price
movement accompanied by a significant increase in
trading volume – the “signature” of a buyable gap-up.
This same tremendous buying volume is a clear sign of
huge institutional buying done with conviction.
Buyable gap-ups are aided by a unique “contrarian”
aspect in that most investors don’t believe the gap and
are afraid to buy it because they think it is “too high.”
The “Argument” is Won Decisively by the Buyers
Characteristics of Buyable Gap-Ups
1. Buyable gap-ups should occur in fundamentally strong and
sound leading stocks, or there should be a compelling
thematic basis for consideration.
2. A buyable gap-up move must be at least 0.75 times the stock’s
40-day Average True Range.
3. A buyable gap-up move must occur on volume that is at least
1.5 times or 150% above the 50-day moving average of daily
trading volume.
4. Buyable gap-ups should occur within an uptrend or
constructive consolidation, not while a stock is in a
downtrend.
5. A buyable gap-up should hold above the intra-day low of the
gap-up day.
Netflix, Inc. (NFLX) Average True Range
Crocs, Inc. (CROX) – May 2007
Priceline.com (PCLN) – 2010
Rovi Corp. (ROVI) – September 2010
Netflix, Inc. (NFLX) – 2011
Baidu, Inc. (BIDU) – 2007
Apple, Inc. (AAPL) – 2004
Biogen Idec, Inc. (BIIB) – 2011
Herbalife, Ltd. (HLF) - 2011
Failure Analysis
Green Mountain Coffee Roasters (GMCR) - 2011
Citrix Systems, Inc. (CTXS) - 2011
Intuitive Surgical, Inc. (ISRG) - 2011
The Seven Week Rule
Use of the 10-day and 50-day moving averages in conjunction with
the Pocket Pivot tool is governed by the “Seven-Week Rule.”
10-day = Stocks that have shown a tendency to “obey” or “respect” the
10-day moving average for at least 7 weeks in an uptrend should often
be sold once the stock violates the 10-day line.
50-day = If they don’t show such a tendency to obey the 10-day moving
average then it is better to use the 50-day moving average as your guide
for selling.
This rule can help prevent you from selling a stock prematurely if it is
simply not its nature to hold the 10-day moving average and it tends to
drop below the 10-day line often. Our studies of pocket pivots indicate
that a pocket pivot buy point which results in an uptrend that is shown
to obey the 10-day moving average for at least 7 weeks following the
initial pocket pivot should be sold upon its first violation of the 10-day
line. A “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.
Chipotle Mexican Grill (CMG)
and the 10-day Moving Average
Apple, Inc. (AAPL) and the 50-day Moving Average
Summary
Buyable gap-ups are often “too high to buy” and thus increase
the contrarian odds of success since the crowd is scared away.
Buyable gap-ups often lead to sharp, sustained upside price
moves, particularly in the earlier stages of a stock’s overall price
move during a bull market, e.g., coming out of the initial or
second-stage base consolidations as the stock starts to make new
price highs at or near the start of a new bull market phase.
Buyable gap-ups that occur in strong, fundamentally thematic
leadership have the highest probability of success.
Download today’s presentation at
www.SelfishInvesting.com
Investor Education section:
http://www.SelfishInvesting.com/faqs
MoKa Market Direction Model™
The model seeks to capitalize on bear
and bull trends in the U.S. and
international stock markets, as well as
related asset classes such as commodities or
currencies.
The model primarily invests in Exchange
Traded Funds (ETFs) as vehicles for
exploiting identifiable trends.
MoKa Market Direction Model™
The model is based upon a proprietary
algorithm that captures intermediate- to
longer-term moves up or down in the stock
market and associated asset classes.
The model generates buy, sell, or neutral
signals of varying strength, which in turn
drives the discretionary portion of the
model with respect to the selection of
appropriate Exchange Trade Fund (ETFs)
vehicles in order to optimize the
exploitation of any market trend.
The model is asymmetric; the model will
seek to profit from both bull and bear
trends, while remaining in cash during
periods of trendless action.
“Fail-Safes” Built into the Model
A unique feature of the MoKa Market
Direction Model™ are its built-in “fail safes”
which take the model to a neutral, or “cash,”
position when a trend cannot be adequately
determined. Dr. Chris Kacher, when first
developing the model, recognized that the
majority of so-called “timing” models fail
because they are often locked into a “buy”
or “sell” signal. MoKa Market Direction
Model™ adheres to a philosophy of
identifying optimal “windows of
opportunity” in the market such that the
fund may only be invested during such
windows of opportunity while remaining in
cash the rest of the time.
MoKa Market
Direction Model™
in Action
Some Visual Examples of the
Model’s Signals and Strategies in
Real-Time.
MoKa Market Direction Model™ Buy/Neutral/Sell Signals using TYH ETF 2009-2010
SN
S
MoKa MD capitalizes on true signals. N
Fail-safes minimize losses on false signals. N
S
S N S N
S
+183.9% gain
B
3/12/09 – 5/14/10
S S
S B [Big Gains]
B
BN B [Big Gains]
N [Fail-safes keeps losses to a minimum]
B [Big Gains]
The Model & the SPDR Gold Trust (GLD) ETF in 2009-2010
S
1. Buy breakouts.
2. Follow the trend.
3. Sell signals lock in profit.
B
The Model during the “Crash” of 2008
S
S
S S [Big Gains]
N NS
B B [Big Gains for „08]
B
Timing Model 2008 = +40.1%
vs.
NASDAQ Comp = -40.5%
N
B
The Model and the NASDAQ Composite Index
during the October 1997 Asian Currency Crisis
N
N
B[Big Gains]
B B
B[Big Gains]
The Model and the NASDAQ in 1994-1995
A Strongly Trending Market
S S[Big Gains]
SN
B
B[Big Gains]
B[Big Gains]
67
The Model during the Crash of October 1987
S S [Big Gains]
S
SN S
NASDAQ
N
-36.8% SS
MD Model 1987 = +79.8%
B
B [Big Gains]
Download today’s presentation at
www.SelfishInvesting.com
Investor Education section:
http://www.SelfishInvesting.com/faqs
