Courtesy of Jean-Luc Saillard.
The move in oil today is the perfect illustration of why it is valuable to have an idea of where the price will “stick” in the coming hours. Drawing support and resistance line based on previous day prices is the easiest way. The formula for calculating the Pivot Point and the Support and Resistance line is available on the Internet. I have programmed Amibroker to display them automatically in my charts at the beginning of the day. Below is today’s price action on the oil future market.
The Pivot Point for the day is in gray, the support lines in red. Resistance lines do not appear as they are above 100. The red circles point out congestion areas and support where you can tell that there was some hesitation on the direction. It is not always that clear cut, but these lines usually offer some guidance!
