Minimum Support Price (Msp)

The minimum support price (MSP) is a term used in technical analysis to describe the lowest price level at which a security is expected to find support and reverse direction. It is calculated by subtracting the average true range (ATR) from the current price.

Formula for Minimum Support Price (MSP):

MSP = Current Price - ATR

where:

• Current Price: The current market price of the security.
• ATR: The average true range, which is a measure of volatility.

Interpretation:

• If the price of a security drops to its MSP, it is expected to bounce back up.
• The MSP is not a guarantee that the security will reach that price, but it is a level where support is likely to occur.
• If the price of a security breaks below its MSP, it can signal a trend reversal.

Example:

• If the current price of a stock is $100 and the ATR is $5, the MSP would be $100 – 5 = $95.
• If the price of the stock drops to $95, it is likely to find support and bounce back up.

Notes:

• The MSP is a theoretical price level, so it is not always exact.
• The MSP should be used in conjunction with other technical indicators to confirm support levels.
• The MSP is not a reliable indicator of future price movements.