One of the most important skills in trading and investing is being able to identify the key levels of support and resistance for a given market. Support and resistance levels are created by supply and demand for a market at particular price levels. When prices fall to a well-established support level, increased demand for the issue at lower prices often triggers new buying. When prices rise to high levels, traders are often willing to sell their position in a market, and that increased supply can cause a market to reverse and turn lower.
There are many ways to determine support or resistance, ranging from chart analysis to the levels determined by moving averages. One of the lesser-used methods is pivot levels. I often use monthly and quarterly pivot analyses to identify support and resistance levels that are not easily identified by other methods of analysis.
In basic pivot analysis, a stock, market average, or ETF is positive if it is trading above its pivot level. In a positive-trending market, the next level to watch is the first resistance level above the pivot or R1. Conversely, if a market is below its pivot then the focus should be on the first support level below the pivot or S1.
In StockCharts.com, if one adds pivot levels to either weekly or monthly charts, it produces a chart with yearly pivot levels. If you are plotting daily data then monthly pivot levels are displayed. On the intra-day charts, the weekly pivot levels are plotted.
The weekly chart of the Spyder Trust (SPY) was previously featured in January 2021 and goes back to July 2018, with the yearly pivot levels for each year. The pivot levels for 2020 appear in the upper left-hand corner, and I have enlarged them as an insert on this chart. The pivot is a solid line, while dotted lines are used for the support (S1 and S2) and resistance levels (R1 and R2)
The SPY opened in 2020 well above the pivot level which was a positive sign. However, the week ending February 21 (point a) the close was below the yearly pivot. The S1 level was also broken two weeks later, during the early March plunge.
Another two weeks later, the SPY dropped just below the yearly S2 level at $216.62, with a low of $215.52 for the week ending March 21 (point b). It was not until Friday, May 23 (point c) that SPY closed at $300.50, which was back above the yearly pivot at $292.64.
SPY traded above and below the year R1 level at $342.79 during August and early November. Then during the first week in December 2020 (point d) SPY surpassed the R2 resistance at $369.09.
The 2020 yearly pivot levels and the actual price data for 2020 are provided in the table above for SPY as well as the Invesco QQQ Trust. Though QQQ easily exceeded the R2 for the year at $258.03 the low during the Covid decline at $164.40 was just a bit below the S1 at $169.55.
In periods of high volatility, I have found that the yearly pivot analysis can often keep you in a major trend when the markets are swinging higher and lower. Looking at the longer term charts can help one avoid the market gyrations.
This chart of Communications Services Select (XLC) is one of the cleanest examples of how well the yearly pivot analysis can work. This weekly chart covers the period from May 2020 through the early part of 2025. The yearly pivots are in purple and a rising 20-week EMA is in blue with a declining 20-week EMA in yellow. On the chart my colleague Jerry A has also programmed the starc bands and moves above either the starc+ or below the starc- band are noted by yellow squares.
After a Covid low of $38.68, XLC closed at $51.96 on 5/3/20 which was above the yearly pivot for 2020 at $49.60. The pivot for 2021 was $58,14 and XLC stayed above it all year. In 2022 the yearly pivot had risen to $76.24 and on 1/21/2022 XLC closed at $71.17 and generated a sell signal.
In October of 2022, XLC had a low of $44.36 and then started to rebound. On 1/20/23 XLC closed above the new yearly pivot at $57.20 but then quickly reversed. Another positive signal was generated on 3/27 /23 with the close at $57.97 which was back above the pivot. XLC was featured as one of my Teflon Sectors.
In July XLC reached the quarterly R1 at $69.22 before correcting for the next three months. In 2024 XLC opened the year above the yearly pivot at $64.69 and stayed well above it for the entire year.
XLC opened 2025 at $98.36 which was well above the new yearly pivot at $90.38 and has held up well so far this year. The R1 for 2025 is at $108.99.
I hope this introduction to yearly pivots has gotten you interested as I will be discussing them further in the weeks ahead. This table has the sector ETFs as well as SPY, QQQ, NYSE, and IWM with the closing prices on 2/28/2025.
The yearly pivots for 2025 as well as the 2nd quarter pivots are also included. XLK closed the week at $225.53 and below the QPivot at $231.12 but it is still above the yearly pivot. XLY Alao CLOEd below its QPivot as did QQQ.
The quarterly signals could be reversed next week as stocks rallied sharply on Friday. IWM this week closed below both the yearly and quarterly pivot. More on the technical outlook next week.