Weekly and Monthly Pivot Points
This lesson will cover the following
- Definition
- Calculation
- Interpretation
Until now we have only spoken about daily pivot point levels but weekly and monthly pivot point analysis is also reliable and thus popular. Swing traders are the ones mainly using pivot points based on weekly data, while position traders favor the monthly variety. They are derived from the same formula as the daily pivot points but use the previous week or months high, low and close. So here are the formulae:
Pivot Point for Current Week (PP) = [High (previous week) + Low (previous week) + Close (previous week)] / 3
Resistance 1 (R1) = 2 x Pivot Point – Low (previous week)
Support 1 (S1) = 2 x Pivot Point – High (previous week)
Resistance 2 (R2) = Pivot Point + [High(previous week) – Low(previous week)]
Support 2 (S2) = Pivot Point – [High(previous week) – Low(previous week)]
Resistance 3 (R3) = High(previous week) + 2 x [Pivot Point – Low(previous week)]
Support 3 (S3) = Low(previous week) – 2 x [High(previous week) – Pivot Point)]
Monthly calculation
Logically, the calculation for the monthly pivot points looks like this:
Pivot Point for Current Month (PP) = [High (previous month) + Low (previous month) + Close (previous month)] / 3
Resistance 1 (R1) = 2 x Pivot Point – Low (previous month)
Support 1 (S1) = 2 x Pivot Point – High (previous month)
Resistance 2 (R2) = Pivot Point + [High(previous month) – Low(previous month)]
Support 2 (S2) = Pivot Point – [High(previous month) – Low(previous month)]
Resistance 3 (R3) = High(previous month) + 2 x [Pivot Point – Low(previous month)]
Support 3 (S3) = Low(previous month) – 2 x [High(previous month) – Pivot Point)]
The mid-pivot points are calculated analogically as well.
Although different types of traders use a variety of pivot points periods (day, swing and position traders), an overlap between them renders a certain price level much more sturdy and hard to be broken. Thus, if a daily pivot point coincides with a weekly one, it will stand a higher chance of successfully pushing the price back in its original direction upon contact.