For any market, there is an equilibrium point around which trading activity occurs. in the absence of large number of new buyers or sellers, this point serves as the pivot or focal point for floor trader and market makers as they adjust their bids and offers. When prices move away from the pivot, there are zone of support and resistance that can be derived from the established value area in the market. Penetration of these zone leads to perceived changes in valuation and they entry of new players into the market. calculation of Pivot Point: Pivot point(P)=(H+L+C)/3 First resistence level(R1)= (2*P)- L First support level(S1) = (2*P) – H Second resistence level (R2)= P+(R1-S1) Second support level(S2)= P – (R1-S1) where H, L, C are the previous day’s high, low and close, respectively.
Chart Analysis
