"Why isn't this silly stock moving?" is what I was thinking this morning. I had spotlighted shares of Pivotal Corp. (NASDAQ:PVTL) in the "hot list" along with Merrill Lynch (NYSE:MER) earlier this morning. MER moved and we eventually locked in a nice day trading profit in the stock, but shares of PVTL just sat there. Not until I got an e-mail from a subscriber regarding a vertical count on Peoplesoft (NASDAQ:PSFT) did I realize what I'd gotten into. I quickly ran a vertical count on PVTL and saw that a bullish price objective of $21.50 was right near where the stock was trading. One of the things that got me to become a point and figure chart lover was that I went back over some bullish trades that I had been crushed in and found that some of them had been initiated right at a longer-term bullish price objective. Perhaps I had done the same in PVTL today, so I alerted traders to this vertical count and urged traders to raise stops or cut the trade. Better late than never.
Pivotal Corporation Chart - $0.50 and $1 boxes.
I made a "rookie" mistake this morning. Somebody told me that shares of PVTL should rock this morning with good news coming from PSFT. I have traded PVTL in the past and agreed. However, the stock wasn't moving. After I did a vertical count on the stock ((8*3)*.5)=$12 + 9.50 = $21.50 it was all I needed to perhaps understand what was taking place. I think the vertical count works so well "because" smart money is the money that creates the first buy signal off the bottom as they build their initial position ($9.50 to $13) Smart money doesn't chase a stock as they "know" the future well before the rest of the market. The stock pulls back and that completes the vertical nature of the count column. Then smart money goes back to work and rounds out their position ($11.50 to $16) with a target in mind. Often times, that vertical count is smart money's target. Stocks can go higher than their vertical counts, but we usually see some consolidation before they proceed much higher.
What you should be doing!
In the future, YOU and I should always check the bullish or bearish price objective for the stocks we're trading. I can be as guilty of this as the next trader. The stock you're currently looking at. Is there enough long-term upside in the vertical count to keep other market participants interested and keep them buying? Is there enough downside to keep them selling? If the answer is ever "maybe not", then find a stock where the answer is emphatically "YES!"