How do you Calculate the Pivot Point?

Rarely a day goes by that someone doesn't ask "how do you calculate the pivot point". And while their are many different ways of coming up with this number, let me share with you what I think is the most common method.

Pivot points are very useful tools that use the previous bars' highs, lows and closings to project support and resistance levels for future bars. Daily pivot points are useful for swing trading. Longer term pivot points provide an idea of where key support and resistance levels should be. Place the pivot points on your charts and see how traders appear to give pivot point levels a lot of respect.

Daily pivots are calculated from previous day's high, low, close. Weekly pivots are calculated from previous week's high, low, close. The pivot levels and charts are updated throughout the day to cater for data adjustments during the day.

Formula: Pivot Point = Previous trading sessions high + close + low, divided by 3.

Try working this on all of your favorite tickers and watch the traders "show some respect"!


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Oil, Natural Gas Lower Heading Into Tuesday's Trading

Crude oil was lower due to profit taking overnight as it consolidates some of the rally off July's low. Stochastics and the RSI are diverging but are bullish signaling that sideways to higher prices are possible near term.

If September extends the rally, the reaction high crossing at 74.25 is the next upside target. Closes below the 20 day moving average crossing at 65.18 would confirm that a short term top has been posted.

Tuesday's daily pivot point, our line in the sand is 70.88. Our weekly pivot point is 67.31.

First resistance is Monday's high crossing at 72.20
Second resistance is the reaction high crossing at 74.25

First support is the 10 day moving average crossing at 67.81
Second support is the 20 day moving average crossing at 65.18

Futures Prices in your In box!

Natural gas was lower due to profit taking overnight as it consolidates some of Monday's rally. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 4.045 are needed to confirm that a low has been posted while opening the door for a larger degree rebound during the first half of August.

If September renews last week's decline, July's low crossing at 3.366 is the next downside target.

The natural gas pivot point for Tuesday is 3.92 with the weekly pivot point at 3.68.

First resistance is Monday's high crossing at 4.16
Second resistance is the reaction high crossing at 4.72

First support is the 10 day moving average crossing at 3.79
Second support is last Wednesday's low crossing at 3.46