- Supports and Resistances
- Identifying Levels
- Standard Pivot Points
- Usage of Pivot Points
- Other Pivot Points
Supports and Resistances
Establishing Supports and Resistances
- Points where supply and demand meet
- A support level may prevent a further decline
- A resistance level may prevent the price from rising further
- Areas to look for potential buy and sell signals
- Previous tops and bottoms
- Supports are the levels below the current market price
- Resistances are the levels above the current market price
Supports and Resistances Changing Roles
- A broken resistance can turn into a support
- Previous resistances represent potential support levels
- A broken support can turn into a resistance
- Previous supports represent potential resistance levels
Supports and Resistances – Tops and Bottoms
- First choose a timeframe you would like to trade
- Mark the ATH (All Time High) and the ATL (All Time Low)
- Mark all previous tops and previous bottoms
- Cluster of levels make the zone more significant
Supports and Resistances – Moving Averages
- Moving averages provide support and resistance
- Add the EMA 20 and the EMA 55
- Mark the averages with horizontal lines
Supports and Resistances – Significance
- Supports are levels below the market price
- Resistances are levels above the market price
- Cluster of levels make the zone more significant
Supports and Resistances in a Range
- In a range, we only have two important levels
- The top of the range
- The bottom of the range
Pivot Points
- Standard pivot
- Demark pivot
- Fibonacci pivot
Pivot Points Calculation
- Estimated using prior high, low and close price of a higher timeframe
- For Intraday charts, use prior day high, low, close
- For medium term charts, use prior week high, low, close
- For long term charts, use prior month high, low, close
Standard Pivot Points
- Resistance 2 (R2) = P + (High – Low)
- Resistance 1 (R1) = (P x 2) – Low
- Support 1 (S1) = (P x 2) – High
- Support 2 (S2) = P – (High – Low)
Other Pivot Points
- Fibonacci and Demark Pivot Points
- Fibonacci main pivot is derived in the same way as the standard pivot point
- Supports and resistances are calculated using Fibonacci ratios 0.382 and 0.618
- Demark Points have a different base and are conditional on the relationship between the close and the open
