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

1. Technical Analysis using R
Software
Calculating Standard Pivot Points - Support
Resistance Levels using quantmod package
Rajesh Prabhakar Kaila
http://facultyofbusinessanalytics.blogspot.in/

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. 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. 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. 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. 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. Infosys Candlestick Chart with
Standard Pivot Points

8. FOR ANALYSIS & INTERPRETATION OF
STANDARD PIVOT POINTS visit my
blog:
http://facultyofbusinessanalytics.blogspot.in/