To analyze price behavior around pivot points, observe how the stock reacts when it approaches the pivot level. If it bounces off the pivot, it may act as support or resistance. Watch for breakouts above resistance (R1, R2, R3) or breakdowns below support (S1, S2, S3) to catch intraday moves. Combine this with volume and candlestick patterns for more accurate signals.

What Are Pivot Points and How Are They Calculated?

Pivot points are technical indicators used by traders to identify support and resistance levels. The main pivot point is calculated using the previous day’s high, low, and close: (High + Low + Close) ÷ 3. From this, support (S1, S2, S3) and resistance (R1, R2, R3) levels are derived. These levels guide intraday trading decisions by marking key price zones.

How Does Price React at the Central Pivot Level?

The central pivot (P) often acts as a magnet for price action. If the stock opens above the pivot and sustains, it’s considered bullish. If it stays below, the trend is bearish. When price hovers around the pivot with high volume, it could indicate a breakout or breakdown is coming. Traders use this zone for early entries and tight stop-loss setups.

What Signals Do Resistance Levels (R1, R2, R3) Give?

Resistance levels indicate where a stock may face selling pressure. If price approaches R1 and reverses, it's a potential intraday shorting opportunity. A clean breakout above R1 with volume can lead to R2 or R3. These levels are commonly used to set profit targets or entry/exit points in day trades. Use with confirmation like bullish candles or volume spikes.

How Do Support Levels (S1, S2, S3) Influence Trades?

Support levels act as buying zones where a stock may reverse its downward move. If price tests S1 and bounces, it’s seen as bullish. A breakdown below S1 may signal further weakness toward S2 or S3. Traders often place stop-loss orders just below these levels or plan buy entries near support with confirmation from RSI or price action.

What Candlestick Patterns Work Best at Pivot Points?

Look for patterns like Doji, Bullish Engulfing, or Hammer near pivot levels. These indicate indecision or reversal. For example, a bullish engulfing pattern at S1 with rising volume may suggest a bounce. Likewise, a shooting star near R1 could mean reversal. Combine candlestick signals with pivot levels for better accuracy in trade entries.

How to Use Pivot Points with Other Indicators?

Combine pivot points with RSI, MACD, or Moving Averages for stronger trade setups. For example, if price bounces from S1 and RSI shows oversold, it adds confidence to your buy. If price breaks R1 and MACD gives a bullish crossover, it signals momentum. This layered analysis increases your chances of success in intraday trading.