The Central Pivot Range (CPR) is a highly versatile indicator. As discussed in previous newsletters, it can help determine whether the day's price action will be sideways or trending, as well as identify the overall trend for the day. In this edition, we will explore another application of CPR—analyzing a slightly broader trend. Specifically, we will learn how to use CPR to anticipate the market direction for the coming few days.

Central Pivot and trend continuation

The Central Pivot is derived from the previous day's High, Low, and Close prices, reflecting the volatility and overall market sentiment of that day. This is why the Central Pivot often serves as a key support or resistance level. However, this concept has been covered previously. The key question now is: how does this information contribute to short term trend analysis?

In a downtrend, increasing supply pushes the Central Pivot lower each day, signaling a progressive decline in resistance levels. Conversely, in an uptrend, the Central Pivot moves higher daily, indicating strengthening bullish momentum.

Observe the 15-minute chart of Nifty 50 below. The CPR indicator consistently shifted lower for three consecutive days, aligning with the prevailing bearish trend during this period.

The same pattern can be observed in the 15-minute chart of MPHASIS, where the CPR consistently shifted downward, reflecting the ongoing bearish trend.

Observe the chart of BAJAJFINSV, where the CPR moved higher each consecutive day, aligning with the upward movement in price.

CPR can also be used to identify consolidation phases. When the CPR alternates between moving higher and lower each day, it indicates a period of consolidation. To define this range, mark the highest and lowest prices during these days.

Observe the chart below of Nifty 50 on 15-min TF. Observe the alternate shift in CPR. The highest point and the lowest point were marked when the CPR indicated a consolidation (shaded region). This range would have become a no trade zone.

CPR can be used to find reversals as well. If you are an intraday trader, you can integrate CPR to give you an edge in understanding the trend and volatility of the instrument. If you have the TNT One subscription, you can check out the How To Trade Candlestick course to learn more about this indicator. If you do not have the subscription, do check out TNT One. 👇🏻👇🏻👇🏻