Dr. Brett Steenbarger from Traderfeed recently put up a series of bonus posts covering how he calculates price targets. I made a Thinkscript that plots them for you according to the methodology in his posts. Dr. Brett says the posts are only available for a limited time, so check his links while they are still there.
There are four inputs:
fivedayrange = yes or no. If yes, then it uses a 5 day average value of the daily range. If no, it uses only the prior day’s range.
RS1coefficient = range multiplier for spacing out the R1 and S1 levels.
RS2coefficient = range multiplier for spacing out the R2 and S2 levels.
RS3coefficient = range multiplier for spacing out the R3 and S3 levels.
These coefficients are a multiplier on the range value to use (either prior day or 5 day average as chosen by the first input). Dr. Brett says that these numbers are found by correlating to past data. For ES/SPY, he uses 0.75, 1, and 1.25 for these numbers. The script will plot the pivot, the levels R1-R3 and S1-S3, the VWAP, and the prior day’s high and low.
If there’s enough demand, I could also make an excel backtesting template to get the correlation stats that he uses to tune the targets to the volatility of the particular symbol you are trading.