StockFetcher Forums · General Discussion · Support and Resistance Clarification<< 1 2 >>Post Follow-up
carolynandjoel
30 posts
msg #38150
Ignore carolynandjoel
9/23/2005 10:10:25 AM

Hello,
I would like to understand some of the subleties of S/R. I have been working under the hypothesis that the determination of support/resistance levels was a visual task. That is, look at the graph and determine the previous low/high point. But I believe the SF has formulae for Support and Resistance. As a matter of fact, I think that is the crux of TRO's "Battleline" filter. Could someone please help me clarify these issues. Thank you, Carolyn


alf44
2,025 posts
msg #38154
Ignore alf44
9/23/2005 3:07:08 PM

carolynandjoel,

I'll leave it to RumpledOne to elaborate on his "BattleLines" filter.

But...from what I understand about it...it is based on the Daily Pivot and S1, S2, R1, R2 levels. StockFetcher offers ways to scan for these measures.

The formulas [ or, formulae if you prefer :) ] is:

Pivot = (H+L+C/3)
Support[S1] = (2*Pivot)-H
Resistance[R1] = (2*Pivot)-L
Support[S2] = Pivot-(H-L)
Resistance[R2] = Pivot+(H-L)

--------------


alf44






alf44
2,025 posts
msg #38155
Ignore alf44
9/23/2005 3:21:08 PM

...also...

just so it's clear...the Daily Pivot and S1, R1, S2, R2...will always be based on the PREVIOUS DAY'S High, Low & Close !

For example...TODAY'S High, Low & Close numbers would be used to calculate TOMORROW'S Pivot, S1, R1, S2, R2 levels!


alf44





da-net
55 posts
msg #38164
Ignore da-net
9/23/2005 7:44:13 PM

There are multiple ways to draw, calculate, etc S&R lines so rather than giving you multiple explanations that may only serve to confuse you, I am supplying a link to Bernie Mitchell's website. He holds FREE online training conferences every Thursday evening using HotComm Lite. In his conference you will see and hear how to find S&R zones using Fibonacci tools. He does at times get a little heavy handed with the push for his paid training. He also gives away a very simple stand alone version of his Fibonacci calculator just for attending the FREE conference and also has a daily FREE email that will show you his projections for what the Market Generals are doing daily. This is very similar to what Joe Di Napoli teaches in his classes, only it is FREE.

http://www.feargreed.com/


alf44
2,025 posts
msg #38172
Ignore alf44
9/23/2005 10:13:28 PM

the question that was posed was directly in reference to the "Battlelines" filter...which implements the use of Daily Pivots and S1, R1, S2, R2 levels...and a "clarification" between THAT and traditiomal "Support/Resistance."

Was my answer "confusing"...as "da-net" seems to suggest ?

I think not !

Jeeez !!!


alf44





jaketheguy
52 posts
msg #38177
Ignore jaketheguy
9/24/2005 8:41:05 AM

alf-44, thanks for taking the time to explain those particular S/R.
da-net, thanks for further illumination on other S/R approaches.

Cheers!


carolynandjoel
30 posts
msg #38340
Ignore carolynandjoel
10/5/2005 6:59:15 PM

Because of alf44's comments, I would like to say that I appreciate all that has been said on this thread. I think, though, that I must not ask the questions clearly enough. So, I will address the support/resistance issue from another angle. When using the visual method of locating support levels and resistance levels, say on a 3 month chart, and using say a 30 day EMA, I feel relatively comfortable making buy and sell decisions. (Please note that S/R is not all that I use but I am limiting this discussion to S/R.)

However, I cannot understand how to interpret the formula for calculating support and resistance. I do realize that the formula uses numbers from the previous day. Is there an underlying presumption that I am not aware of? For example, is it assumed that if today's price action approached the calculated support that the price will likely "bounce?" If yes, where can I find a more in depth discussion of how to use formula based support and resistance to make buy and sell decisions? Again, I wish to thank all of you. Carolyn


carolynandjoel
30 posts
msg #38343
Ignore carolynandjoel
10/5/2005 7:26:41 PM

Sorry, but I did not comment on da-net's info on feargreed.com. I did go over there and although, I have not yet signed up for a seminar, I think that I have discovered some style or philosophical differences. I have been adhering to the belief that the only reliable information is price and volume. All other indicators are sort of derivatives of those 2 variables. I think that my biases on that topic have clouded my ability to grasp the concept of using such information as formulae for pivot points, S/R, etc. Certainly an area for me to do further study has been identified.

I will try to be more conversive on a topic before posting questions in the future. Thank you, again, Carolyn

PS - I would like to explain my lack of response to these postings. It is a carry-over from another board which specifically discouraged using message space with things like thank you, I understand, etc. I apologize if I appeared rude.


alf44
2,025 posts
msg #38345
Ignore alf44
10/6/2005 12:15:10 AM

carolynandjoel,

The question(s) you asked wrt S/R were perfectly clear...I understood your question and felt my reply was also clear...but, somehow there still seems to be a misunderstanding.

Again...

Classic Support/Resistance areas on a chart are largely visual.

You look for areas on a chart where (in the case of Support) prices stop declining and begin to rise...AND...areas on a chart where (in the case of Resistance) prices stop advancing and begin to fall ! The validity of these Support/Resistance levels is given MORE WEIGHT when they have been "tested" more than once ! And...when these levels have been successfully tested and re-tested over TIME...the combination of TIME and multiple TESTS/RE-TESTS increases their validity further.

You also mentioned an EMA(30). I use an EMA(30) myself (among others). Some people like a 20 period...some prefer a 40 or a 50...whatever...these EMAs can serve as a sort of "dynamic" Support/Resistance Line or Trendline ! But, it sounds like you know that already. :)

--------------------

As for Daily Pivot Points and the resulting Support(S1 & S2) and Resistance(R1 & R2) levels...these calculations have nothing at all to do with the Classic S/R lines discussed above. All of these levels are derived from the previous days H/L & C ! I posted the formulae for calculating them above (and they are also provided here on SF...and all over the internet for that matter). They are valid...ONLY FOR THE FOLLOWING TRADING DAY ! At which time (after the Close) you will have a new H/L & C and a NEW set of Pivot/S/R numbers will be calculated for the next trading day.

Typically, these numbers are used by daytraders and short-term traders to monitor intra-day price action for the following trading day. However, there ARE methods to use short-term averages of the Pivot...as a way to track daily trend ! For example, if the Daily Pivot is above a 3 day average of the Daily Pivot...or, if the 3 day average of the Daily Pivot is above a 5 (or 7) day average of the Daily Pivot the short-term trend would be assumed to be UP so...you would look to play LONG positions. I like this idea myself and HAVE been playing around with it for some time.

So...what do the Pivot and S1, S2, R1, R2 really mean and how do you trade off them ? Well, first...there is nothing magic about them. The Pivot is basically just the previous day's "average price." Think of it as a "line in the sand." If "today's price" can trade above "yesterday's average price" (ie. the Pivot) that would be considered "bullish"! But ONLY for TODAY ! It has NO long-term implications beyond today ! But hey...if it manages to trade, not only above the Pivot, but also above the R1...and even the R2 levels...well...that might have "bullish" implications for tomorrow as well. They're could likely be some follow through.

I could go on but hopefully this helps to explain the distinction between "Classic S/R" Lines and the Pivot calculations and the S/R numbers that are derived from it. Do a Google on Daily Pivots etc... There is a lot of stuff out there on them.

In closing, I will say that it is sometimes uncanny how Price reacts around these Pivot numbers. There ARE some traders that watch them AND trade them...and I suspect that's WHY they have relevence. They are a convenient "reference" that can help establish a framework for which to base trading decisions. But, they are for intra-day trading (for the most part) and should NOT be confused with Classic S/R chart analysis. Also, they are probably MORE valid for highly liquid securities that have wider trading ranges.


Regards,

alf44






carolynandjoel
30 posts
msg #38349
Ignore carolynandjoel
10/6/2005 10:20:16 AM

Dear alf44,
Thank you so much for the explanation. That helps alot. I think one could see from my more recent messages that I was beginning to see that the Pivot points with S1, R1, etc. were to be used in a totally different way from what I always thought were traditional uses of support/resistance.

This is not the only example of the same words being used to mean different things. Thank you again, it simply points out to me the importance of having a common frame of reference in order to understand a concept. Carolyn


StockFetcher Forums · General Discussion · Support and Resistance Clarification<< 1 2 >>Post Follow-up

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