The first two gates in our method answer what to watch: Theme finds where institutional money is flowing, and Fuel confirms there's a real engine of earnings and sales behind a name. But a great company in a great group can still be a bad purchase on the wrong week.
The third gate is Trigger, and it answers when. The short version: we wait for a defined pivot. Three setups give us one: a tight coil, a gap-up, and a pullback.
What a coil is
Look at the chart above. On the left, the stock swings wildly — big rallies, big breaks, buyers and sellers fighting it out. Then something changes. The swings get smaller. Weekly closes bunch together. Volume dries up. The spring compresses.
That contraction is information. It means the sellers who wanted out are out, and the shares left are held by owners who aren't eager to sell. Supply has gone quiet. When new demand arrives against that quiet supply, the move can be fast — that's the spring releasing.
From that coil we define a pivot: a precise price level, usually just above the tight range's high, where the stock proves the breakout is real. Above the pivot, demand has won. Below it, nothing has happened yet, and we do nothing.
When a gap-up sets a new pivot
Sometimes the stock doesn't wait for the range to finish. A strong earnings report or a major catalyst sends it gapping up on heavy volume, past where any old pivot would have been. That gap is demand showing up all at once, and the old plan no longer applies.
A gap-up resets the trigger. The gap day's range becomes the new reference, and we define a fresh pivot from it. If the stock holds the gap and clears that pivot, it's actionable. If it fills the gap and slides back into the old range, the move has failed and we stand aside.
When a pullback sets the pivot
A leader that has already broken out doesn't always give a second coil. Instead it pulls back in an orderly way, often on lighter volume, to a level that should hold: the old breakout point or a rising moving average. Sellers test it and fail to push through.
When the stock turns back up from that level, the turn defines the pivot and the pullback's low defines the stop. Done right, a pullback gives a second entry with the same small, pre-set risk as the original breakout.
The stop comes before the buy
Here's the part of Trigger that matters more than the entry: the stop is defined before we ever place the order. Every plan in our reports specifies the pivot and the exit level together, and the two are never more than 5% apart. If a setup would require more than 5% of room, it isn't a setup — it's a coin flip with bad terms, and we pass.
Why 5%? Because the arithmetic of losses is brutally asymmetric. A 5% loss needs roughly a 5.3% gain to recover. A 40% loss needs 67%. Capping every single risk at a small, survivable number means no one position — and no one bad week — can take us out of the game. Being wrong is a routine cost of this business. Staying wrong is the thing that ends accounts.
The setup is what makes the small stop possible. Buying a stock mid-swing means normal noise will hit any tight stop. Buying at a defined pivot — out of a tight range, off a gap that holds, or up from a pullback low — means the stop sits just below a level where, if the stock returns to it, the trade has genuinely failed. Getting stopped out is real information, not noise.
Patience is the actual skill
Most weeks, most stocks on our watchlist are not at a trigger. The report says so plainly: here's the name, here's the pivot it needs to clear, here's the stop if it does — and until then, we wait. Nothing is more expensive than acting early to feel busy.
Next week, the final gate: what we do after a trigger works — trimming into strength and raising stops behind each new floor.
This is the third post in a four-part series on the fundamentals of our approach. Nothing here is individual investment advice — it's how we do our six hours, so you can do your fifteen minutes.