How could Pivot Point (Resistance and Support) help active day trader?

 

What is Pivot Point?

Pivots Points are price levels chartists can use to determine intraday support and resistance levels. Pivot Points use the previous days Open, High, and Low to calculate a Pivot Point for the current day. Using this Pivot Point as the base, three resistance and support levels are calculated and displayed above and below the Pivot Point.

 

How to calculate Resistance and Support Level?

Resistance Level 3 = Previous Day High + 2(Pivot – Previous Day Low)

Resistance Level 2 = Pivot + (Resistance Level 1 – Support Level 1)

Resistance Level 1 = (Pivot x 2) – Previous Day Low

Pivot = Previous Day (High + Low + Close) / 3

Support Level 1 = (Pivot x 2) – Previous Day High

Support Level 2 = Pivot – (Resistance Level 1 – Support Level 1)

Support Level 3 = Previous Day Low – 2(Previous Day High – Pivot)

 

How this indicator works?

Pivot Point support and resistance levels can be used just like traditional support and resistance levels. As with all indicators, it is important to confirm Pivot Point signals with other aspects of technical analysis, such as trending indicators, moving average EMA, MACD, Volume Adjusted Moving Average (VAMA) etc.

 

Example of Resistance Level and Support Level - Twitter Stock Price Analysis (daily and 3 months)

Below is Twitter Intraday stock (Aprial 25th, 2022) price with three resistance Levels and three support levels, and its comparasion with DJIA 

From above chart, we can find out that Twitter stock move up and down the in the pivot line range, green lines represent resistance level, red lines represent support level, the highest resistance level stock price is around $52.65, the lowest support line is around $45.46, any price over or under these price could be over bought or over sold. The blue line represents DJIA stock price, generally speaking, Twitter stock price is over performe DJIA,.

Below is the chart combining Twitter stock, pivot point, DJIA,  Volume Adjusted Moving Average (VAMA) 

From the above chart, it is obvious that Twitter stock over perform DJIA, its trading volume jumped after Tesla CEO Elon Musk declared to own over 9 percent of Twitter stock, indicating Twitter stock trading is very active, which is type of stock active traders are searching for.