Pivot Point Analysis & Trend Definition In Trading Commodity/Currency/Stock Market
Intra-day Pivot Point Analysis
There are a number of Pivot points to consider. The nature of the Market action around these pivot points can be useful in giving clues on the immediate direction of the market. The pivot points to consider are the previous day’s high, low and close.
Openings
The opening of a market in relation to the previous day’s action is the first clue on the direction of the market for that day, but it is by no means conclusive. It could be ]ust satisfying all the bulls, say, in an up opening prior to a reverse movement. However, there are times when this indication can be extremely useful. The student must learn to integrate all the pertinent factors. With these reservations and no other factors at hand, indications are:
- An up opening in relation to previous close indicates an up market.
- A down opening in relation to previous close indicates a down market.
Gap Openings
Gaps on the opening seldom are present at the end of the day. The floor trader utilizes this information and will frequently sell a higher opening to drive it back down to the previous close where he will take scalping profits and might even reverse positions at this point. This is why a gap that exists at the end of a trading day has added significance.
Opening Plus 30 Minutes
The markets will frequently establish a trading band in the first 30 minutes of market action. The direction out of this band will frequently establish the direction of the market for that day.
Close – The close in relation to previous close and opening is important in pointing direction of next day’s action. The opening is more important than previous day’s close. Penetration of previous day’s high or low gives added significance. Also important is where the market closes in the range of the day. Above mid-range] is positive. Below mid-range is negative.
Range – If today’s range is greater than the previous day’s range, it gives added significance to the direction of the move. These daily impulse patterns should be considered only as a rough index of trend direction. The whole pattern must be integrated prior to forming definite conclusions.
Pivot Point (PP)
A top pivot point is the highest point reached in a swing prior to penetration of the low of the top day. A bottom pivot point is the lowest point reached in a swing prior to penetration of the high of the low day.
Swing: The movement from one pivot point to the next
Trend Direction – Trend is up as long as new highs and higher lows are being made. It changes from up to down when the last low prior to the new high is broken.
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