Chart Tools
Business Spectator's charting tools allow you to analyse company share prices, compare stocks and indices over time, and apply technical analysis techniques to help you identify trends.
There are a number of controls available in the charting application. Most controls can be used in conjunction with one another, but some only become active when certain other selections have been made. If a particular selection cannot be used in conjunction with other controls, those controls will become unavailable. For more information on the tools available, click on Extended Help.
Time Period
Charts can be plotted historically for periods between 1 month and 10 years of the last trading day of the security (normally the current day). Intraday charts plotting the current days trades (20 minute delayed) can also be requested.
Chart Type
Line - Plots the closing price of a security over the selected Time Period.
Candle - Candlesticks depict the daily trading range (high and low price) of a security and its relationship between opening and closing prices. Candles are filled when the security has closed lower for the day and are empty when the security has risen. Analysts look for patterns in the candles to attempt to predict future price trends.
Candle charts are best viewed over shorter time periods (less than 3 months).
OHLC - OHLC stands for the four elements displayed on a typical price bar: opening price, highest price, lowest price and closing price. Each of these prices is depicted on the bar.
It is said that if the close price is closer to the top of the bar then there is demand for the security and hence the share price may rise. Conversely if the close bar is closer to the bottom of the bar then demand for the security is weak and the share price is more likely to fall.
Percent - Plots the percentage change from the first date in the Time Period for a security based on the closing daily price. The percent chart is the default Chart Type displayed when comparing securities or indices against each other. See Compare Code and Compare Index.
Moving Averages
Moving Averages are the simplest and most widely employed technical indicator used by analysts. Moving Averages smooth the price data by averaging the previous [x] days closing price.
Analysts sometimes look for crosses in the price line by the Moving Average line to signal a trading opportunity. Common practice is to consider buying when the price crosses above the Moving Average line from below or consider selling when the price crosses below the Moving Average line from above.
The length analysts choose for the Moving Average depends on their investment strategy. Longer Moving Average periods are best for picking long term trends. Conversely short Moving Averages will highlight short term trends.
On the Business Spectator website you can plot up to two Moving Averages on each chart at any one time.
Compare Code and Compare Index
Often it is useful to compare a security's performance against another within the same market sector or industry. This can highlight whether a security's trading performance relates solely on its internal market conditions or if the trend is caused by wider factors.
For example, Westpac's share price chart may show recent falls but this could be caused by a broader negative view of the banking sector rather than the individual performance of Westpac. One way to confirm this is to use the compare code and compare index controls and analyse how Westpac has compared relative to the Finance sector or other securities operating in the banking sector.
If you are comparing a stock or index then the Chart Type will default to percent and the other line types will become unavailable. To access other Chart Types you need to remove the compare code and set the Compare with Index to None.
Indicators
Relative Strength Index - The Relative Strength Index (RSI) indicator measures the magnitude of gains over a given time period against the magnitude of losses over the same period. The resulting value can range from 1 to 100.
Some analysts believe that a value of 30 or below indicates an oversold condition and that a value of 70 or above indicates an overbought condition.
Stochastic Indicators - The Stochastic Oscillator attempts to gauge the momentum of ensuing trends by analysing the location of the current close relative to the high/low range over a set number of periods. Closing levels that are consistently near the top of the range indicate buying pressure and those near the bottom of the range indicate selling pressure.
Some analysts look for the following signs to aid their entry into a stock:
- Buy when the Oscillator (either or ) falls below a specific level (e.g. 20) and then rises above that level. Sell when the Oscillator rises above a specific level (e.g. 80) and then falls below that level.
- Buy when the line rises above the line and sell when the line falls below the line.
On the Business Spectator web-site the following values are applied:
Fast Stochastic
= 14 days and = 3 days.
Slow Stochastic
= 14 days smoothed by a 3 day Simple Moving Average and = 3 days.
Bollinger Bands - Bollinger Bands are an extension of the Moving Average indicator and are used to confirm trading signals from other indicators (most commonly Relative Strength Index).
Bollinger Bands are plotted at standard deviation levels above and below a Moving Average line. Since standard deviation is a measure of volatility, the Bands are self-adjusting. They widen during volatile markets and contract during calmer periods.
The Business Spectator Bollinger Bands employ a 20 day Moving Average with a 2 point standard deviation as recommended by John Bollinger, the creator of the indicator.
The following points should be considered when reviewing Bollinger Bands.
When Bollinger Bands contract this often indicates that a change in trend is imminent and is normally followed by a sharp price movement.
A price line that breaks out of a Band indicates the trend is strong and likely to continue.
A price line that hugs one Band indicates the trend is strong and likely to continue.
Disclaimer and further information
Technical Analysis and chart interpretation is a complicated subject. This help sections is not intended to be a comprehensive manual for interpreting charts, and only intends to provide you with the briefest of introductions.
Business Spectator does not provide any individual investment advice or money management assistance. Business Spectator's employees are not brokers, dealers or licensed investment advisors and do not attempt to influence the sale or purchase of securities. Nor does Business Spectator respond to any email requests for guidance with regards to securities.
Past performance is not indicative of future performance. Securities are subject to investment risks, including possible loss of the principal amount invested.
Should you want to further your general knowledge on charting and technical analysis, here is a good place to start. You should seek independent financial advice from a licensed advisor before making investment decisions.