SPY Weekly Pivot Points

Discussion in 'Trading' started by ShadowTrader_08, May 17, 2009.

  1. ShadowTrader_08

    ShadowTrader_08 ET Sponsor

    As we stated in the <i>ShadowTraderPro Video Weekly</i>, both the NASDAQ 100, and the Russell 2000 have broken their ascending trendlines and are showing weakness, however the S&P 500 Index is still holding onto it's ascending trendline and trading above the 20 day moving average. For traders, this is a bit of a mixed bag with regard to indications of where price will trade next. Let's examine the daily chart of the S&P Dep Receipts (<B>SPY</B>) below to gain a frame of reference for this week.

    <img src="http://assets.shadowtrader.net/charts/090518SPY.gif" width="560" border="5" height="650">

    If you have listened to the <i>ShadowTraderPro Squawk Box</i> broadcast, you probably have heard the show's host, Brad Augunas refer to pivot points and how they can be used as levels of support and resistance for intraday trading. These same methods can also be applied to swing trading using daily, weekly and even monthly charts.

    We have drawn the <u>weekly</u> pivot points on the daily <B>SPY</B> chart above which were derived using the high, low and close of last week's <b>SPY</B> price bar. The orange circle shows the <B>SPY</B> is trading just below this week's pivot point (PP=89.66) which is a slightly bearish indication. The orange circle also highlights how the <B>SPY</B> has been hanging out at the ascending trendline (magenta dotted line) for the past three trading days. Take note of this because the longer price sits on the trendline, the greater the chances of it breaking through and trading lower.

    If the <B>SPY</B> does in fact trade lower this week, our first price target would be the S1 pivot level (87.20). Interestingly, S1 ties in beautifully with support created by prior highs (light blue oval). If S1 were broken, we would consider the opportunity of countertrend plays off of S1 or the likelihood of price following through down to S2 (85.70), but this is for a future <i>ShadowTraderPro Swing Trader</i> issue.

    Remember, the same formulas used to caluculate pivot points for the E-mini S&P Futures (<B>/es</B>) can be used to calculate the pivot points for any security being analyzed including individual stocks and etfs. To obtain the formulas to calculate the pivot points, click (<a href="http://www.shadowtrader.net/glossary.html"><font color="#ff0000">here</font></a>) and look for "Pivot Points" in the glossary.

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