First off, thanks for your posts. As a long from $15 a few months back, it's been painfully accurate to read your analysis, but informative much appreciated. Hoping that a bounce is on the cards from around this level and soon I hope to average down in the $8s.
Anyway my question is about your pivots. I'm starting to learn a bit about TA, but don't know anything about pivots. How do they inform your trading? If the stock closes above the pivot, does that indicate an uptrend, or vice versa?
Any info is much appreciated from someone just starting to realise the value in using TA to time buys/sells.
You probably won't find much written about pivots but they are used by almost all serious traders. Floor traders of old, and futures pit traders still calculate them daily. When you're in the pits and the action gets heavy, you're not watching a screen but you know where the pivots are and you can gage the strength of the market by if and how the pivots get rejected or broken.
There are only a few truly leading indicators, Fibs, certain oscillators, and pivots, so they shouldn't be ignored. Following is the classical way to calculate them:
Given: P = pivot point; S = pivot support; R = pivot resistance
H = previous period high; L = previous period low; C = previous period close.
Then: P = (H+L+C)/3
S1 = P - (H - P) = 2P - H
R1 = P + (P - L) = 2P - L
S2 = P - (H - L)
R2 = P + (H - L)
S3 = P - 2(H - L) or by another method: S3 = L - 2(H - P)
R3 = P + 2(H - L) or by another method: R3 = H + 2(P - L)
You asked: " If the stock closes above the pivot, does that indicate an uptrend, or vice versa?"
Answer: Absolutely. In fact how far away from the pivot it closes indicates the strength of the trend. However, in a consolidation the price can close above one day and below the next.
You should use a time frame for pivots one level up from your trading time frame. If you trade the weekly chart, you should use monthly pivots. If you trade the daily chart, then you should use weekly pivots. Or, if you trade intraday, you should use daily pivots. Ultimately though, everyone at some point has need to use the daily pivots to zero in on their entry or exit. Such is the case right now with SKUL which is very near the buy point.
I have 17 rules which I apply to pivots. The most important one is never trade against the pivot. If the market is above the pivot you should not go short. Let's say you trade on the daily chart and the market moves up to the weekly pivot resistance 1 or 2. You know you can wait for a retracement to get a better entry price, but you should NOT go short. The exception would be for a scalp short daytrade, but that's not the time frame you intend to trade.
Just over 2 hrs of trading. Opened at 8.59 and ran up and thru the daily pivot = 8.73 and stopped by the daily pivot resistance 1 = 8.95 which was also the top line of the intraday downtrend channel. Possibly looking to take out the B point of an ABCD-down. A=8.96, B = 8.58, C=8.73, D(1.000) = 8.35, D(1.272)=8.25.
But, on the daily so far, has not put in a lower low. Needs to take out 8.50 for a lower low. If it can hold then I can mark the trough "e" , the 5th lower low since the 16.75 high. Would be sweet to see "f", a lower low on Monday.
GSCO is still hanging around on Level2 with one lot at 8.03. Not sure if it means anything but I'd like to keep an eye on their activity since they probably trade for the professional money.
I think if the broader market doesn't tank... (Big If) then SKUL can drift higher at least to the previous lows of 11.8-12.0, I don't see any big resistance till that level. But the big thing is the stock needs to stabilize and not fall further (below 8.5)