John Bollinger is among the industry's most respected technical analysts. In the "Contrary Corner" of his Capital Growth Letter, the advisor suggests scaling into a package of three home building stocks.

He explains, "For this exercise, I've looked at 20 home building stocks, each stock based on its monthly charts. Yes, I know that seems like a sacrilege in the day and age of hyperactive short-term trading, but we are taking the long view here.

"I then looked at the percentage drop from the stock's most recent swing high and then the number of months from the peak to the trough or the present if a swing low has not been established. I then looked to determine if there is a swing low in place.

"After reviewing these 20 homebuilding stock, I've chosen 3 candidates to start. I like the idea of selecting a fair number of small positions that add up to a normal sized position, then eliminating the non-performers as time passes while keeping the winners. We are choosing WCI Communities (NYSE: WCI), Standard Pacific (NYSE: SPF) and St. Joe (NYSE: JOE) as our first commitments."

Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.

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.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Although advisors participating in the Top Picks Report were limited to two stock picks, we allowed John Bollinger to select three, in compliance with the strategy employed in his The Capital Growth Letter.

He explains, "My strategy is not about stock picking in the sense of what will do best in 2007. Rather we ask what is doing well now, invest in that, hold for as long as the performance is satisfactory and then move on. This method is known as the cast-out method of relative-strength investing.

"As an example, let's take a look at our ETF Sector Portfolio. After a careful screening process we have selected 27 sector ETFs as candidates for this portfolio. Let's suppose that we are just starting out. To get going we would purchase the top three ranked ETFs and hold them for as long as they are ranked better than the middle of the list.

"When one of the funds drops below the midpoint of the ranking, it will be sold and replaced with the highest-ranked fund that is not already held in the portfolio. We use daily data and conduct reviews on a weekly basis. There are several other rules, but that's the essence of the program.

"We have found this cast-out approach to relative-strength investing delivers the sort of performance that we are after in our practice, and that it has an acceptable risk-reward relationship. As of December 18th, our top three ranked sector funds are: iShares Global Telecom (ASE: IXP), iShares Select Energy (ASE: XLE), and Powershares Dynamic Media (ASE: PBS)."