MailBag October 29, 2010 at 09:05 AM
Chartists can identify overbought and oversold levels by measuring the how far extended a security has become from its moving average. This can be shown with two indicators: Moving Average Envelopes and the Percent Price Oscillator (PPO). Moving Average Envelopes show two parallel lines that are a specific percent above and below a moving average. The Percentage Price Oscillator (PPO) is a momentum oscillator that shows the percentage difference between two moving averages. he chart above shows the S&P 500 ETF (SPY) with Exponential Moving Average Envelopes set 2.5%, 5% and 7.5% Read More
MailBag October 23, 2010 at 04:46 PM
Q: How do you determine where to put the red and blue trendlines on your P&F charts? A: If you select "Trend Lines" in the Overlays area of our P&F Charting Workbench, we automatically add red and blue trendlines to your chart like this: (Click here for a live version of this chart.) We add these trendlines by following a core tenet of Point and Figure charting - trendlines on P&F charts are always drawn at 45 degree angles. (I don't have a reference to the original source of that guideline. It's been around as long as P&F charting itself.) Read More
MailBag October 22, 2010 at 07:26 AM
On Balance Volume (OBV) and the Accumulation Distribution Line are indicators that combine price and volume. Both start with price by forming a multiplier for volume. OBV is simple. The volume multiplier is +1 when the close is above the prior close and -1 when the close is below the prior close. This means total volume is subtracted on a down day and added on an up day. The Accumulation Distribution Line is a bit more complicated, but still pretty easy to understand. The volume multiplier also ranges from -1 to +1. The multiplier is positive when the close is above the mid point of the Read More
MailBag October 15, 2010 at 10:31 AM
Why does the VIX sometimes gap down when the S&P 500 opens firm? In short, the CBOE Volatility Index ($VIX) is prone to gaps in the middle of the month because of the option rollover. VIX measures the implied volatility of near-term and next-term put and call options for the S&P 500. According to a rather complex formula at the Chicago Board Options Exchange (CBOE), the near-term options must have a least a week until expiry. As the middle of the month approaches, these options must be rolled to the next month to keep the formula valid. The next-term options must also be rolled Read More
MailBag October 15, 2010 at 10:31 AM
Why does the VIX sometimes gap down when the S&P 500 opens firm? In short, the CBOE Volatility Index ($VIX) is prone to gaps in the middle of the month because of the option rollover. VIX measures the implied volatility of near-term and next-term put and call options for the S&P 500. According to a rather complex formula at the Chicago Board Options Exchange (CBOE), the near-term options must have a least a week until expiry. As the middle of the month approaches, these options must be rolled to the next month to keep the formula valid. The next-term options must also be rolled Read More
MailBag October 08, 2010 at 03:55 PM
What is the difference between MACD and the Percent Price Oscillator (PPO)? Both are momentum oscillators that produce similar lines. MACD shows the absolute difference between the 12-day and 26-day exponential moving averages. PPO takes MACD one step further by showing the percentage difference between these two moving averages. Even though the resulting lines look the same, one can compare PPO values for a variety of securities. MACD values cannot be compared. This is why we show the PPO in our Gallery Charts. ACD values are influenced by the price of the underlying security. MACD Read More
MailBag October 01, 2010 at 04:35 PM
There are at least three ways to measure market volatility using SharpCharts. Standard Deviation is the classic quantitative measure for volatility. This complex formula measures the deviation of closing prices from the mean. Chartists can also use Average True Range (ATR), which was developed by Wells Wilder an introduced in his classic 1978 book, New Concepts in Technical Trading Systems. This book also includes the Parabolic SAR, RSI and the Directional Movement Concept (ADX). Despite being developed before the computer age, Wilder's indicators have stood the test of time and remain Read More
