Pivot Point

Technical Analysis

A pivot point is a reference level calculated as the average of the previous period's (usually the previous day's) high, low and close.

Levels derived from it are used as possible resistance (R1, R2) and support (S1, S2). It is mainly a day trader's tool. The formula is mechanical; whatever significance the levels have comes from many market participants watching the same numbers.

Example

If yesterday's high was $110, low $100 and close $105, the pivot is (110 + 100 + 105) / 3 = $105. The first resistance is 2 × 105 - 100 = $110 and the first support 2 × 105 - 110 = $100.

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