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Technical Analysis using R Software - Calculating Standard Pivot Points - Support Resistance Levels

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Technical Analysis using R Software - Calculating Standard Pivot Points - Support Resistance Levels

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Technical Analysis using R Software - Calculating Standard Pivot Points - Support Resistance Levels

  1. 1. Technical Analysis using R Software Calculating Standard Pivot Points - Support Resistance Levels using quantmod package Rajesh Prabhakar Kaila http://facultyofbusinessanalytics.blogspot.in/
  2. 2. Introduction to Pivot Points  Technical Analysts often refer to Pivots Points that can be defined as a point at which a major price movement is expected to occur.  Pivot Points basically define directional price movement or support and resistance levels.  Pivot Points are calculated using the prior period's high, low and close price of the stock, commodity or currency and based on which a future support and resistance level is identified.  Pivot Points can be considered as predictive or leading indicators.  Pivot points are to be calculated on daily basis.
  3. 3. Pivot Points – Time Frames  Pivot Points for 1, 5, 10 and 15 minute charts use the prior day's high, low and close.  Pivot Points for 30 and 60 minute charts use the prior week's high, low and close. These calculations are based on calendar weeks.  Pivot Points for daily charts use the prior month's data. Pivot Points for current month would be based on the high, low and close for previous month.  Once Pivot Points are fixed, they do not change and remain same during the relevant time frame. Source: http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:pivot_points
  4. 4. Standard Pivot Points Calculation  Standard Pivot Points also called the five-point system as it involves five different points. ( Average Point + S1+S2+R1+R2 ).  Calculation is based on the simple average of previous day's high, low and close prices combined with two support levels (S1 & S2) and two resistance levels (R1 & R2) to derive a pivot point. The equations are as follows: R2 = P + (H - L) = P + (R1 - S1) R1 = (P x 2) - L P = (H + L + C) / 3 S1 = (P x 2) - H S2 = P - (H - L) = P - (R1 - S1)  Here, "S" represents the support levels, "R" the resistance levels and "P" the pivot point. High, low and close prices are represented by the "H," "L" and "C," respectively.
  5. 5. R Code for Standard Pivot Points getSymbols('INFY.BO',src='yahoo') # Data downloaded from January 1st 2007 till the current previous day INFY=INFY.BO['2015-01-01::2015-05-31'] # Choosing Data from January 1st 2015 till May 31st 2015 head(INFY) # First Six Lines of Data chartSeries(INFY) # Candlestick Chart of Infosys center <- xts(rowSums(HLC(INFY))/3,order.by=index(INFY)) # Average of High, Low & Close Price (H+L+C/3) head(center) # First Six Lines of Data R1 <- (2*center)-Lo(INFY) # First Resistance (R1) = (2*P) - Low S1 <- (2*center)-Hi(INFY) # First Support (S1) = (2*P) - High R2 <- center + (R1 - S1) # Second Resistance (R2) = P + (R1-S1) S2 <- center - (R1 - S1) # Second Support (S2) = P - (R1- S1) ret <- cbind(center,R1,R2,S1,S2) # Combining all Calculations in adjacent columns
  6. 6. R Code for Standard Pivot Points colnames(ret) <- c('center','R1','R2','S1','S2') # Column Names dat = cbind(INFY,ret) # Combining both the sheets or files head(dat) # First Six Lines of Data write.csv(dat,"Datasupres.csv") # Saving a copy as CSV file chartSeries(INFY) # Candlestick Chart of Infosys addTA(dat$S1, on=1, col='lightblue') # Adding Support1 Line to Candlestick Chart addTA(dat$S2, on=1, col='blue') # Adding Support2 Line to Candlestick Chart addTA(dat$R1, on=1, col='pink') # Adding Resistance1 Line to Candlestick Chart addTA(dat$R2, on=1, col='red') # Adding Resistance2 Line to Candlestick Chart
  7. 7. Infosys Candlestick Chart with Standard Pivot Points
  8. 8. FOR ANALYSIS & INTERPRETATION OF STANDARD PIVOT POINTS visit my blog: http://facultyofbusinessanalytics.blogspot.in/

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