Recently I have fielded a few questions about my StockCharts charts and I wanted to spend a little time talking about the information contained in these charts. For starters, StockCharts offers what they call a “gallery view” for each ticker. This is a group of three free charts consisting of a daily chart with five months of data, a weekly chart with two years of data and a point and figure chart. StockCharts members also have a fourth intraday utilizes ten minute bars for the past four days.
While these gallery charts are an excellent starting point, the true power of StockCharts is in creating custom charts. At the bottom of this post is what I would call my “standard chart” from StockCharts, which uses daily bars over the course of the past eleven months. My standard chart utilizes candlesticks because I prefer the informational content that can be displayed in one candle. I also utilized three simple moving averages: 10 days (solid blue line) for the short-term; 50 days (dotted red line) for the intermediate-term; and 200 days (dotted green line) for the longer-term. These are widely-used moving averages and the selection is somewhat arbitrary. I prefer the 10 day to the more common 20 day because I often have a very short-term time horizon and because the 10 day is utilized heavily by traders who follow the VIX.
The gray cloud around the candlesticks is Bollinger Bands, set to 20 days and two standard deviations. I like to use Bollinger Bands to give a sense of the ebb and flow of historical volatility superimposed on the price data, rather than as a separate study above or below the main price chart. I choose to display these by area instead of the more typical lines because I want to limit the lines cluttering up the chart and give some semblance of visual clarity. According to extensive studies done by John Bollinger,
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.