News Corp.: Bollinger's pivot play

John Bollinger has long been a pioneer in technical analysis; his Bollinger Bands are a mainstay of the analytical world.

In his latest Capital Growth Report, he explains another technical concept – pivot points – and uses this technical tool to highlight his latest buy recommendation

Bollinger explains, "I first learned of pivots about 10 years ago from a very accomplished trader by the name of Bob Wibbelsman. A pivot is a chart formation that shows up on the relative strength line rather than on the price chart.

"The prerequisite is a rising relative-strength line, the steeper the better, which is to say, the stronger the underlying stock, the better." A relative strength line of RS, he explains is "a line formed by the ratio of a stock to an index over time, mostly commonly the S&P 500."

With getting to technical, he summarizes the set-up that he is looking for. He notes, "A pivot occurs when the RS line forms a small flag or pennant after a period in which it has been rising steadily. The name of this game is to find pivots on the RS line and then buy the stocks as they return to strength."

Some more-sophistiacted traders and investors interested in considering this tool for future stock picking. But for most, this technical explanation has been included to support Bollinger's latest new stock pick.

He states, "Based on this approach of high relative strength pivots, we are adding News Corp. (NYSE: NWS) to our buy list and setting a stop at 22.5."

In addition to choosing the stock based on its 'pivot point,' Bollinger notes, "Adding to our immediate interest in this selection is the performance of the overall media sector, which is currently the number one sector in our proprietary group ranking system. Overall, the media group appears to be doing everything it can to resist the decline."

For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free daily website, TheStockAdvisors.com.