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What are PricePoints

'PricePoints' are levels that will help you take decisions about likely price movements. Technically, they are a variation of Support and Resistance Levels and are calculated in similar ways, except that past data is extensively used in the calculation process.

In practice, you should draw horizontal lines on your chart at the beginning of the day as per these Price Points and observe price movements across these lines as the day progresses.

Given below is an example from a 'Suggest' given on 18-Sept-09. The Price Points, Chart, and other details shown are correct for the given date. Horizontal lines have been drawn on the Yahoo! Chart in light blue colour as per PricePoints.

 

PricePoint Example

 

NAME PP1 PP2 PP3 PP4 PP5 PP6 PP7
JPASSOCIAT 235 238 244 246 249 252 255

 

 

How to use PricePoints

  • When prices move through any known level (PP1, PP2, PP3, PP4) on increased volume, they are most likely to continue the current trend...

  • If prices hit the known level but are unable to move through, then they are most likely to reverse the current trend.

  • In the example given above, the stock opened above PP3(244) and quickly crossed PP4(246) and PP5(249). This indicates there is momentum in this stock and prices are likely to increase.

  • This is not always correct. In this case, the price kept fluctuating between PP5(249) and PP6(252) for most part of the day. These two PricePoints acted as Support and Resistance levels. This area is with yellow background in the chart above.

  • However, later in the day, there was a breakout from PP6(252) where even PP7(255) was crossed.

  • First point of interest is when PP4(246) is crossed. As per our guidelines, you will wait till the next stage PP5(249) is crossed before you place a BUY order. You will also study volume patterns and other chart-indicators before you decide to enter into the trade.

  • In this case, your BUY order would have been at 250. STOPLOSS would be 248 because 249 can act as a Resistance level, which it does. EXITs would be at PP6(252-EXIT) and PP7(255-EXIT+1). Here your purchase should have been at 250 and sale at 258(EXIT+2).

    The terms used above have been defined and explained in the file "Our Guidelines". Please go through the explainations for BUY, STOPLOSS, EXIT, EXIT+1, EXIT+2, etc.

  • The effectiveness of PricePoints depends on your ability to use the system in conjunction with other forms of technical analysis. These other Technical Indicators can be anything from MACD crossovers to candlestick patterns — the greater the number of positive indications, the greater the chances for success.

  • We would like to say this again: PricePoints alone cannot be a messenger for change. It is only an indicator, and you should look for confirmatory signals from other Technical Analysis indicators like CandleStick formations, MACD cross divergence, Stochastic Divergence, MA Crossover, ADX, MFI, RSI, Woody's CCI, Bollinger Band squeeze, etc. Only if two or more indicators point to the same direction can you accept that as prediction for change — the greater the number of positive indications, the greater the chances for success... Even then, please use your judgement and use ALL of these only as guidelines.