Estimating Support and Resistance from Minimum Bar Swings

Summary

The SRm_Cloud indicator estimates resistance and support from the smallest intrabar movement away from each bar's open. For each daily or weekly bar, it takes the smaller of the distance from the open to the high and the distance from the open to the low. It calculates an average of these minimum swings and their standard deviation over a configurable period, then applies user-set coefficients to form the levels around the open. A larger average-plus-deviation measure is selected in the described calculation.

The document contrasts this approach with a Greatest Swing Value method, stating that it includes minimum swings from all bars rather than separating divergent bars. It also describes combining weekend bars with Monday bars and using the combined extremes when calculating Monday levels. The text explains the construction and settings but provides no empirical validation, trading rules, or evidence that the levels predict reversals. The source indicator was published in 2013, and its settings require user choices about period and coefficients.

Key ideas

• The indicator uses the smaller open-to-high or open-to-low distance as each bar's minimum swing.
• It combines the average minimum swing with a scaled standard deviation to estimate support and resistance around the open.
• The calculation uses all minimum swings rather than separating divergent bars.
• Weekend bars are combined with Monday data when deriving Monday levels.
• The document describes the formula but gives no performance tests or signal-confirmation rules.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.