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CHARTING PERCENTAGE ABOVE/BELOW A MOVING AVERAGE

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Hello Fellow ChartWatchers!

(Here's an article I wrote back in 2007.  We've gotten several questions about this topic recently, so I thought I'd re-print this now.  Enjoy!  - Chip)

Mary W. writes "I'd like to see how much above or below the 200-day moving average a stock currently is. Does your charting system show that?"

While we don't have a specific indicator for "Percentage above/below the Moving Average", clever chartists that understand how the "Price Oscillator (PPO)" works can create such an indicator easily. The PPO is very similar to the well-known MACD Indicator. Both are based on the difference between two exponential moving averages. The PPO differs from the MACD in that it's values are converted into a "percentage difference" rather than the "absolute difference" used by the MACD.

Essentially, PPO(#1, #2) = Percentage Difference of EMA #1 from EMA #2.

Remember, what Mary asked to chart is "Percentage Difference of the Closing value from the 200-day Moving Average."

See the similarity in those two statements? If Mary is willing to use the difference between the close and a 200-day Exponential Moving Average, then we can accommodate her. The final piece of the puzzle is to recognize that "Closing value" is equal to "EMA(1)." Given that, then

PPO(1, 200) = Percentage Difference of EMA(1) (i.e., Close) to EMA(200).

Thus all we need to do is plot PPO(1, 200) to see the line that Mary is asking for.

Percentage Above/Below 200-day EMA

Viola! With a couple of setting changes, we can overlay that indicator on our price plot:

Overlaid Percentage Chart

Click either chart to see how they were constructed. Last we heard, Mary was happily charting percentage differences left and right. Hopefully, this trick can help your chart analysis also!

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More
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