Understanding the Distance from Pivot S2 Filter

The Distance from Pivot S2 filter in stock trading is a technical analysis tool used by traders to gauge how far a stock's current price is from the second support level (S2) calculated from pivot points. Pivot points are significant price levels derived from the previous day's high, low, and close prices, and they help traders identify potential areas of support and resistance.

Here's how the distance from pivot S2 filter works:

Calculation of Pivot Points: Pivot points are calculated based on the previous day's high, low, and close prices. The pivot point itself is the average of these three prices. Support and resistance levels are then calculated around the pivot point. Here are the formulas to caculate those specific points:

• Resistance 2 = Pivot + (R1 - S1)
• Resistance 1 = 2 * Pivot - Low
• Pivot Point = (High + Close + Low) / 3
• Support 1 = 2 * Pivot - High
• Support 2 = Pivot - (R1 - S1)

Identification of Support Level S2: S2 (the second support level) is one of the support levels calculated from pivot points. It is derived using the following formula: Pivot - (R1 - S1)

Measurement of Distance: Once S2 is calculated, traders measure how far the current price of the stock is from this level. The distance can be calculated as the absolute difference between the current price and S2 or as a percentage of the range between the pivot point and S2.

Application in Trading Strategies: Traders use the distance from pivot S2 filter to make trading decisions. For example:

• If the price is significantly above S2, it may indicate bullish sentiment, and traders may look for buying opportunities or expect a potential bounce in price.
• Conversely, if the price is below S2, it may suggest bearish sentiment, and traders may consider short-selling or exiting long positions.

Distance from Pivot S2 Filter Settings

The settings of each Trade Ideas filter are defined in the Window Specific Filters Tab located in the Configuration Window of your Alert/Top List Window.

Here is how to setup the filter in your configuration window:

To find stocks between their first and second support lines, set the max above pivot S1 to 0 and the min above pivot S2 to 0. This will show stocks which have dropped some since yesterday, but not too much.

Using the Distance from Pivot S2 Filter

Several trading strategies can be employed with the Distance from Pivot S2 filter. Here are a few examples:

Bounce Trading Strategy: Traders look for price bounces near the S2 support level combined with confirmation from the distance from pivot S2 filter. When the price approaches the S2 support level and the distance from pivot S2 indicates oversold conditions, traders may anticipate a potential bounce. They may wait for bullish reversal patterns or oversold signals from other indicators to confirm the bounce before entering long positions.

Range-bound Trading Strategy: Traders look for trading opportunities within a range established by the pivot points, including S2. When the price bounces between the pivot point (P) and the S2 support level, traders may use the distance from pivot S2 filter to identify potential entry and exit points. They may buy near the S2 support level when the distance from pivot S2 suggests bullish sentiment and sell near the pivot point (P) when the distance from pivot S2 indicates potential resistance.

Reversal Trading Strategy: Traders look for reversal signals near the S2 support level combined with confirmation from the distance from pivot S2 filter. When the price approaches the S2 support level and the distance from pivot S2 indicates oversold conditions, traders may anticipate a potential reversal. They may wait for additional confirmation, such as bullish reversal patterns or divergence in other indicators, before entering counter-trend positions.

FAQs

What does the distance from pivot S2 represent?

• The distance from pivot S2 represents the deviation of the current stock price from the second support level (S2) calculated from pivot points. It indicates how far the price is from a significant support level, potentially influencing trading decisions.

What does it suggest if the stock price is close to the S2 level?

• If the stock price approaches the S2 support level, it may suggest potential oversold conditions. Traders often interpret this proximity as a signal of potential support or a bounce in price.

Can the distance from pivot S2 filter be applied to different timeframes?

• Yes, the distance from pivot S2 filter can be applied across various timeframes, including intraday, daily, weekly, or monthly charts. Traders should adjust their analysis and interpretation based on the timeframe they're trading.

Can the distance from pivot S2 filter be combined with other technical indicators?

• Yes, traders often combine the distance from pivot S2 filter with other technical indicators, such as moving averages, oscillators, or trendlines, to enhance their trading strategies and confirm signals.