InvestorQ : Can pivot points also be used to measure supports and resistance of a stock? How will this work in practice.
Rutuja Nigam made post

Can pivot points also be used to measure supports and resistance of a stock? How will this work in practice.

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Arti Chavan answered.
2 years ago
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Pivots Points are price levels chartists can use to determine intraday support and resistance levels. Pivot points are essentially used for intraday traders since it uses the previous day price as the reference point. That makes it a very short term measure of price movement. 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.

Let us now shift to how this indicator actually works in practice. 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. So it is not just a standalone measure of entry and exit levels but needs to be ratified by other means too. The calculation of pivot resistance levels is as under:

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

The calculation of pivot levels is as under:

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

The calculation of pivot support levels is as under:

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)
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