Longer Term Pivots

Finally, there is one other important concept: applying a pivot range to a longer period of time whether it be weeks or even months. As I explained earlier in this chapter, the concept remains the same: you calculate the pivot range using the highest high and the lowest low of the time frame, and the settlement on that time frame. For example, if you were looking at a two-week trading period, you would determine the highest price for that period, the lowest price for that period, and then the settlement on the last trading day of that period. Now, using those three numbers, you would calculate the pivot range, using the same formula as you did for the daily pivot.

Further, when it comes to long-term pivot ranges, we have found that certain time frames are statistically significant. In particular, the pivot range calculated on the first two weeks of the year is statistically significant for the first half of the year. The pivot range calculated on the first two weeks after mid-year (meaning the first two weeks of July) is statistically significant for the second half of the year. In other words, the pivot range that is calculated on the first two weeks of the year delineates important support/resistance for the market for the first half of the year. The market then resets at mid-year, and the pivot range based on the first two weeks of July defines support/resistance for the second half of the year.

Once you have calculated the pivot range for this extended period of time, such as for the first two weeks of the year, you would determine the price targets at which you would have a long bias or a short bias. These targets are known as the A up and the A down. But unlike the Point As used in daily strategies against the opening range in Chapter 1, these A up and A down targets take into account a longer-term view.

Let's take a look at an example. Figure 2.12 is a weekly chart for natural gas futures January through mid-year 2001. The pivot range based upon the first two weeks of the year is 9.005 to 8.650. (The pivot range was calculated with a high of 9.870 from January 9, a low of 8.140 on January 3, and the close of January 12 of 8.472.)

Based upon this pivot range, the A up and A down targetsĀ» are calculated. Since this is a long-term perspective, instead of a daily one, we use a larger A value, in this case 200 ticks. (By

NG Weekly Chart

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