Daily Pivot Points ...
martinh1 said:
Would you mind explaining where you come up with the daily R2 pivot point?
Martinh1,
Daily Pivot Points are commonly used aspects of Support and Resistance within the
current day's trade.
On a 'normal' trading day in which no extraordinary forces (news or other events) are pushing the price of a stock up excessively or pressing it down excessively, traders use Pivot Points as an indication of the upper and lower boundaries of the
current day's price action.
Each stock receives a fresh set of 5 Pivot Points each day.
The 5 Pivot Points are derived from the previous day's High, Low and Closing Price. They are labeled as follows:
1)
"Pivot" is the middle member of the 5 Pivot Points. As such, it represents
neutrality.
2)
"R1" is the 1st Resistance Price from the "Pivot". It represents an
intermediate level of Resistance for the current day's trade.
3)
"R2" is the 2nd Resistance Price from the "Pivot". It represents an
extreme level of Resistance for the current day's trade.
4)
"S1" is the 1st Support Price from the "Pivot". It represents an
intermediate level of Support for the current day's trade.
5)
"S2"is the 2nd Support Price from the "Pivot". It represents an
extreme level of Support for the current day's trade.
The "Pivot" as an Indicator:
Professional traders use the "Pivot" to gage whether a stock is demonstrating bullish behavior, bearish behavior or neutral behavior within the current day's trade
A stock that trades
above its "Pivot" is demonstrating
neutral to bullish behavior. It often rises to its "R2" Price at some point during the trading day. When a stock is finding Support at its "Pivot", odds favor a trade on the long side.
A stock that trades
below its "Pivot" is demonstrating
neutral to bearish behavior. It often dips to its "S2" Price at some point during the trading day. When a stock is finding Resistance at its "Pivot", odds favor a trade on the short side.
The chart below is a 10-Minute Chart of the QQQQ. It shows how Support at the "Pivot" (the gray line) could have been purchased and then sold when the QQQQ rose subsequently to Resistance at "R2" (the green line):
1) The "Pivot" was $36.27.
2) After the QQQQ opened at $36.39, it pulled back to test Support at the "Pivot" ($36.27).
3) Support was found.
4) The QQQQ rose subsequently to test Resistance at "R2" ($36.70).
5) Resistance was found.
6) By the close, the QQQQ had pulled all the way back to the "Pivot" ($36.27 to the penny).
For more information, Google "Pivot Points". You will find web sites that provide the formula for calculating the "5 Pivot Points". Some web sites will do the calculation for you when you enter the previous day's High, Low and Closing Price.
