In technical analysis of crypto markets, a pivot low is a chart pattern indicating a temporary bottom in an asset’s price, often signaling a potential reversal from a downtrend to an uptrend. It is characterized by a price point lower than the surrounding candlesticks or bars, serving as a reference for support levels and potential entry points.
Mechanism
A pivot low forms when the price declines to a certain point, then begins to rise, with the lowest point of the downtrend flanked by higher lows on either side. This formation suggests that selling pressure has diminished and buying interest has increased, creating a local minimum. Algorithmic trading systems often identify these points by analyzing price action over specific timeframes.
Methodology
Traders utilize pivot lows to identify potential support zones and anticipate market reversals. The methodology involves visually identifying the low point on a price chart, often confirmed by an increase in buying volume or positive divergence in momentum indicators. These points are used to set stop-loss orders below the pivot and target resistance levels above, forming the basis for tactical long positions or hedging strategies.
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