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- Flink update_bars debouncing - update_bars subscription idempotency bugfix - Price decimal correction bugfix of previous commit - Add GLM-5.1 model tag alongside renamed GLM-5 - Use short Anthropic model IDs (sonnet/haiku/opus) instead of full version strings - Allow @tags anywhere in message content, not just at start - Return hasOtherContent flag instead of trimmed rest string - Only trigger greeting stream when tag has no other content - Update workspace knowledge base references to platform/workspace and platform/shapes - Hierarchical knowledge base catalog - 151 Trading Strategies knowledge base articles - Shapes knowledge base article - MutateShapes tool instead of workspace patch
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description: "Derives support and resistance levels from the previous day's pivot point and trades breakouts or reversals relative to these computed price levels."
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tags: [stocks, technical-analysis, support-resistance, pivot-point]
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---
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# Support and Resistance
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**Section**: 3.14 | **Asset Class**: Stocks | **Type**: Technical Analysis
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## Overview
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This strategy uses "support" (S) and "resistance" (R) levels computed from the previous day's high, low, and closing prices via a "pivot point" (center) C. The trader establishes or liquidates positions based on whether the current price crosses the center, reaches the resistance, or falls to the support level.
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## Construction / Signal
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Using the previous day's high `P_H`, low `P_L`, and closing `P_C` prices:
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**Pivot point (center)**:
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```
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C = (P_H + P_L + P_C) / 3 (325)
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```
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**Resistance level**:
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```
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R = 2 * C - P_L (326)
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```
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**Support level**:
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```
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S = 2 * C - P_H (327)
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```
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**Trading signal** (P is the current price):
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```
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Signal = { Establish long position if P > C
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{ Liquidate long position if P >= R
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{ Establish short position if P < C
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{ Liquidate short position if P <= S (328)
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```
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## Entry / Exit Rules
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- **Long entry**: Current price P crosses above the pivot center C.
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- **Long exit**: Current price P reaches or exceeds the resistance level R (take profit at resistance).
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- **Short entry**: Current price P crosses below the pivot center C.
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- **Short exit**: Current price P falls to or below the support level S (take profit at support).
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## Key Parameters
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- **Price inputs**: Previous day's High (P_H), Low (P_L), Close (P_C)
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- **Pivot definition**: Standard: `C = (P_H + P_L + P_C) / 3` (other definitions exist)
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- **Holding period**: Very short-term (intraday to 1 day); pivot levels are reset daily
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## Variations
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- **Open-price pivot**: Some definitions use the current day's open price instead of the prior close P_C
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- **Higher/lower support-resistance levels**: Extended pivot systems define multiple support/resistance levels (S2, S3, R2, R3)
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- **Breakout mode**: Instead of reverting at S/R, treat a break through R as a new long entry (trend-following variant)
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## Notes
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- Support and resistance levels are reset daily using the previous day's OHLC data.
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- The strategy is primarily intraday or very short-term (daily bar).
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- There is substantial literature on support/resistance strategies but academic evidence for profitability is mixed.
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- Can be combined with volume confirmation: signals are more reliable when price breaks through S/R levels with increased volume.
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- The pivot point methodology has many variants (using open price, weekly pivots, Fibonacci ratios, etc.).
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