What Are Classic Stock Pivot Points?

Classic stock pivot points are a type of technical analysis tool used by traders to identify potential levels of support and resistance. They are calculated based on the previous day’s high, low, and close prices and provide a reference point to help traders make informed decisions about entering and exiting trades.

Now, you can find classic pivot points in the Technical Analysis section for each stock on TipRanks’ platform. For example, click here to learn META stock’s classic pivot points. You will see the table as you scroll down the page.

What Are Stock Support and Resistance?

Support and resistance levels are key concepts in technical analysis that refer to price levels at which a stock’s price tends to stop falling (support) or rising (resistance). These levels are used by traders to determine potential levels of price reversal and to identify key levels at which they may enter (Buy) or exit (Sell) trades.

Support levels are areas where demand for a stock is expected to be strong enough to prevent its price from falling further. Traders will often look to buy the stock if it reaches a support level, as they expect the price to rebound.

Resistance levels, on the other hand, are areas where supply is expected to be strong enough to prevent the price from rising further. Traders will often look to sell the stock if it reaches a resistance level, as they expect the price to start falling.

How Are a Stock’s Classic Pivot Points Calculated?

The calculation of classic pivot points is relatively straightforward:

1. Pivot Point (P) = (Previous Day’s High + Previous Day’s Low + Previous Day’s Close) / 3
2. First level of support (S1) = (2 * Pivot Point) – Previous Day’s High
3. First level of resistance (R1) = (2 * Pivot Point) – Previous Day’s Low
4. Second level of support (S2) = Pivot Point – (R1 – S1)
5. Second level of resistance (R2) = Pivot Point + (R1 – S1)
6. Third level of support (S3) = Pivot Point – 2 * (R1 – Pivot Point)
7. Third level of resistance (R3) = Pivot Point + 2 * (R1 – Pivot Point)

For example, here are GOOGL stock’s classic pivot points:

How Are Classic Pivot Points Useful to Investors?

Traders will often look for price action near these levels of support and resistance to make buy or sell decisions. If the price is above the pivot point, it is generally considered to be in an upward trend, and traders may look for buying opportunities. If the price is below the pivot point, it is generally considered to be in a downward trend, and traders may look for selling opportunities.

It’s important to keep in mind that classic pivot points are just one of many technical indicators that traders use to make informed investment decisions. It’s always a good idea to use a combination of technical and fundamental analysis to make informed decisions.

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