Pivot Points

Discussion in 'Technical Analysis' started by Minime, Sep 27, 2002.

  1. josbarr


    (H-L) - S2=S3 (H-L) + R2=R3
    #21     Nov 5, 2002
  2. If you notice, the range from the projected high to low is the same as the range from the R2 to Pivot, and the Pivot to S2. You'll also notice the range from S2 to S1 equals the range from Pivot to R1 and so on.

    Knowing this, you can calculate the Pivot and from there figure out as many S's and R's as you need.

    #22     Nov 5, 2002
  3. Tea


    IMHO pivot is an obsolete indicator. It was originally designed for floor traders before they had computers with moving averages.

    Pivot basically mimics a 20 period exponential moving average on a 15 minute chart. With the 15-minute ema - when it is sloping, you look to buy or sell in the direction of the ma. When it is flat, like this morning on the S&P, you ignore it.

    The short coming of pivot is that it doesn't tell you when to ignore it and it doesn't adapt to afternoon price movement as does a moving average.

    S1, S2, R1, R2 are basically levels of a Bollinger Band or envelop around the moving average.

    Do a visual backtest of pivot versus the ema and you will see what I am talking about.

    Bottom line - why use a static indicator? I suspect, even floor traders have moved on to using moving averages.
    #23     Nov 5, 2002
  4. Back test that idea for even a week and see how many times the market changes direction on a static pivot point. If it is also the 20 MA or 50 MA or yesterday's HOD or LOD then better yet but the pivots work well enough to not be ignored. Good luck

    #24     Nov 5, 2002
  5. Hey Richk,

    I believe the formula for the 3rd numbers are as follows:

    R3= (H-L)+R1

    S3= (H-L)-S1

    I believe josbarr's formula is inaccurate.

    A very good website to check is www.patterntrapper.com
    #25     Nov 5, 2002
  6. nkhoi

    nkhoi Moderator

    it all depend, there is no such thing as inaccurate s/r calculation
    #26     Nov 6, 2002
  7. ddefina


    Speaking of pivots, notice how todays pivot at around 911.50 stopped the morning freefall and is now support for the listless market.
    #27     Nov 6, 2002
  8. josbarr


    I use the second number but some folks use R1 or R2 / S1 or S2.
    We've had 20-25 point ranges as of late so the third number has'nt been much of a factor.
    #28     Nov 6, 2002
  9. ddefina -

    The buying support you attributed to that old pivot calculation might more realistically be coming from buyers who were using the 100 day EMA of the SPX, SPY, and/or SP02Z

    With the 50 basis point cut, the first reaction was to sell through that intraday support though - we'll have to see if the bounce back takes back the prior support level or it's now become resistance.
    #29     Nov 6, 2002
  10. The pivot was @911.25 (to the tick) and the market stopped dropping exactly at that level. Also, the pivot R1 @918.5 was a good strong resistance after the market bounced back off the pivot and stopped advancing at 918.75. If you shorted at this level, you would have gotten 8-9 pts on the way down. The S1 support @906.5 was broken only slightly (the bottom was at 903), the market then bounced back again. You could trade off these levels especially with the help of tick- extreme lows at the bottom with the trin oversold indicating a reversal which did happen.
    #30     Nov 6, 2002