I’m tracking a long position from 1099.40, based on a ‘mechanical-trade’ recommendation sent out to Rick’s Picks subscribers Wednesday evening. The trade gets its name from the set-it-and-forget-it method of managing risk once one is aboard. It is ‘mechanical’ in another sense as well: Entry is signaled on a pullback to the red or the pink line once either has been exceeded by a certain amount. (The exact amount is proprietary to the Hidden Pivot Method.) These trades work best when they occur in ABCD-type patterns that look likely to reach their targets. They are patterns we’ve seen before and which we’re comfortable with — like the one in the chat, actually. In this trade, our price objective is 1127.70, a ‘Hidden Pivot’ target which if reached would produce a gain of about $2800 per contract.  Our initial stop-loss is set ‘mechanically’ at 1090.10, limiting our theoretical risk to no more than 1/3 of the $2800 we stand to gain if the rally target is achieved.

A further refinement of the Hidden Pivot Method is called ‘camouflage’. Essentially, this means waiting for entry signals on big-picture charts, then initiating the trade on charts of much lesser degree — sometimes one-minute bar charts or less. Typically, the initial stop-loss, which determines the dollar amount risked at the time of entry, will be commensurate with the small ABCD pattern. However, the potential reward will tend to be relatively larger, since it is tied to the target of a larger pattern. It takes work to find good ‘camouflage’ entry spots, but the tactic can reduce the theoretical risk of entering a trade by 90% or even more.  Using camouflage, we typically look to come away from a trade with at least a small profit, even if the trade goes against us. If you would like to learn more about the Hidden Pivot Method, click here.  Many who frequent the Rick’s Picks chat room have mastered it.  Meet and converse with them by taking a free trial subscription here. _______ UPDATE (9:39 a.m. EST): Although the futures have done well to have survived the assault of a global short squeeze in stocks, we did not get long just to twiddle our thumbs for days on end. I’m recommending ditching the position, currently trading for around 1097.50, even though the weekend evening could bring some horrific news that might benefit our position.