Pivot levels as a daily trade hypothesis

Yesterday’s range as a session map

A next-session Pivot point can be computed from the prior session’s high, low, and close as their three-value average. First support and first resistance are then derived by reflecting that pivot against the prior high and low.

Second support and second resistance can be placed one prior-session range below and above the pivot. The same high-low width that built the pivot also sets those outer checkpoints.

Ways to include today’s open

Two documented calculation variants fold today’s open into the pivot. One is a four-value average of today’s open with yesterday’s high, low, and close. The other is a three-value average that replaces yesterday’s close with today’s open.

Both variants are meant to accommodate opening gaps and extended-hours trading.

The pivot as the first decision

In the source’s working rule, price above the pivot is treated as bullish and price below it as bearish. The pivot itself is the first place used to decide whether a long or short hypothesis is live.

A short hypothesis opened below the pivot uses first support as the initial cover checkpoint. If price continues through that level, a Stop-loss order is placed just above first support and then trailed lower. Second support is treated as the session’s expected low and the final cover objective.

The converse long hypothesis, opened above the pivot, uses first and second resistance as successive profit checkpoints rather than as entry triggers at the outer extreme.

A December 1999 Nasdaq 100 case

In the December 1999 Nasdaq 100 case, price stalled near the 2852.33 pivot without quite tagging it. It later touched the 2803 second-support area and turned up, then hit the pivot at 10:55. After that tag, a long was considered slightly above the pivot, with a Stop-loss order near 2850.00 and first resistance at 2883.67 as the first objective.

After that case-study long broke 2884, the documented choice was either to exit at first resistance or to cancel the original Stop-loss order and trail the remainder as price moved toward the 2901.33 second-resistance level.

Why the levels are not used alone

The method is presented as unreliable when used alone, because price often fails to touch either support or resistance. The source therefore pairs the levels with a prior trend reading and refuses trades against that trend.