Page 76 - A Complete Guide to Volume Price Analysis: Read the book then read the market

Fig 7.13 Isolated Pivots

These are the defining points for the start of any congestion phase. And the easiest way to understand pivots is to suppose the market is moving
higher in an up trend, and we see an isolated pivot high formed on the chart. We have now seen the first sign of possible weakness in the market.
These pivots are created by a three bar/candle reversal and as shown in Fig 7.13 above. To qualify as a three bar/candle reversal the candle in the
centre has to post a higher high and a higher low, creating the pivot high pattern. The appearance of one pivot does not mean we are moving into a
congestion phase at this point. All we can say at this stage is that we have a possible short term reversal in prospect.

Now we are waiting for our equivalent isolated pivot low to be created. This occurs when we have a three bar/candle pattern where the centre
candle has a lower low and a lower high than those on either side. Again we have an example in Fig 7.13.

Once this candle pattern appears on our chart, we can now draw the first two lines to define the ceiling and the floor of our congestion zone. The
pivot high is the ceiling and the pivot low is the floor. These simple candle patterns not only define the start of any congestion phase, they also
define the upper and lower levels as the market moves into a period of sideways price action. This is referred to as congestion entrance as Kn
edefine th we can see in Fig 7.14.