Trading Pivot Points Part 1

I've been studying reaction of price to pivot points for the EUR/USD and USD/JPY for a couple of weeks now but have yet to come up with a viable way of trading pivot points.  I've been exploring pivot points in an effort to create yet another system that uses price as its main indicator and not a lagging indicator.  There is a lot out there on the web that explain how to trade pivot points but nothing that has really got my attention.  Many of the systems use the pivot point level as the main support or resistance level that is targeted for a possible breakout or fade trade.  

One way of trading pivot points that I've been exploring is by incorporating the divergence of the MACD.  MACD is obviously a lagging indicator but divergence can take some of that lag out when certain patterns are recognized.  Let me show you an example.  It's easier with a video but I'm just brainstorming here so I'm just going to attach a graphic.

The question I'm asking myself is, as the price is approaching the pivot point level marked on the chart, how do I know whether to trade a break or a fade.  Looking at just price, the only indicator is the previous day and the fact that the pair was bullish.  I think that only having this information is not enough to make anything but a total guess trade.  Let's now bring our attention to the MACD histogram and the bullish hidden divergence that was evident even before the price touched down on the pivot point level.  You could see this divergence forming during the first few candles of this day and maybe even before that.  We can use this as a confirming indicator to tell us what direction we should be looking to trade.  In the above case, we would be looking to go long at a pullback to the pivot point.  We get the pullback and target the R1 level as our profit level where you can see the price consolidated.  

Like I said earlier, I'm just brainstorming and have not seen this exact method anywhere (you may have.)  I am not trading this method either.

I started a new site last week, http://www.allpivotpoints.com that has the latest pivot points for FOREX and 50,000 other securities.   These FOREX pivot points are not derived from any particular market maker, but from 250+ contributors from the interbank market.

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