How to Use The Charts On This Site
One of the purposes of using this web site is to gauge the strength of stocks and, together with other information and tools, to make buying and selling decisions through technical analysis, i.e., by reading charts. This is accomplished by examining several key indicators found in the main window of the stock charts.
This page attempts to explain (1) what these indicators means; (2) user-customizable chart options; and (3) how they are acutally used in real examples.
Strength Indicators
The following example shows the names and positions of the indicators.
The indicators can be roughly divided into three groups according to their relative positions in the chart. The explanation and interpretation of the indicators are as follows:
| Group | Name | Description | Definition | Interpretation | Usage |
|---|---|---|---|---|---|
| Top | STS | Short-term Strength Line | the difference between RSAP (see below) and its 25-day exponential moving average (EMA). | Positive value (green) indicates short-term strength, while negative(red) value indicates short-term weakness, relative to the reference(s). | Negative STS while LTS is positive may present a buying opportunity, and vice versa. Positive STS while LTS is still negative may present a selling/shorting opportunities. |
| LTS | Lhort-term Strength Line | the difference between RSAP (see below) and its 200-day exponential moving average (EMA). | Positive value (green) indicates long-term strength, while negative(red) value indicates long-term weakness, relative to the reference(s). | One should try to own stocks with long-term relative strength to the market and their peers, in other words, the market leaders. | |
| SPD | Strength-Price Divergence | Divergence between price and RSAP | Positive values (green) indicates relative strength and vice versa. | Very important indicator but interpretation may be very difficult. (I will probably write a separate piece just for this in the future). | |
| SRI | Support-Resistance Indicator | Support and resistance defined as unusal relative strength or weekness shown in RSAP | A leading indicator that may predict trend-reverals. Note that the reversal may be temparary, i.e., the stock may resume the longer-term trend after several days. A darker green or red may be more significant than the light green or light red. | Used for timing the stock purchases and sales. | |
| ERA | Earning Report Alert and Results | Earning Report Alert and Results | Warning/alert that next earning report is due in a few days, ended with actual result from the report (green: upside surprise; red: downside surprise). | Expect greater volatility before and after the earning release, which may need to be ignored. Or one should stay out of a stock prior to the earning report. | |
| Middle | EMA25 | 25-day EMA of closing Price | A long-term up-trending stock tends to remain above the 25-day EMA line for a long-time, i.e., weeks or months, and vice versa. | Hold such stocks if price is still over EMA25, and vice versa. | |
| RSAP, the purple line | Relative strength-adjusted price | Price after removing impacts from market volatility or that of other reference stocks or indices. | RSAP goes up if relative strength is observed vs. the market or reference(s). RSAP goes down if relative weakness is observed. RSAP is flat if market-performing. | Try to own stocks with increasing RSAP. (But it is hard to tell. Suggest to use other derived indicators.) | |
| RSAP Trend Line | 20-day EMA of RSAP | Trend of RSAP. | Stock performing well if this line goes up and vice versa. | One should try to own stocks with RSAP above this trend line, and with increasing RSAP trend line. | |
| Bottom | LTS0 | Baseline long-term strength | Difference between price and its 25-day exponential moving average | - | - |
| STS0 | Baseline short-term strength | Difference between price and its 200-day exponential moving average | - | - |
Note the indicators in the bootom group are just the traditional moving average-based indicators. Also note that SRI is the most 'advanced' indicator because it's derived from, hence depended on, many other indicators and data types. The main work-flow for the calculation of SRI is:
ClosingPrice ---> RSAP ---> SPD ---> SRI
Chart Options
The input to the charts can be modified through different ways.
Some options, for example the references, can be set through the web interface on the chart page. Others can be customized through the "Preference" menu. Still all of these options can be modified using the URL, i.e., the web site address. For example, the following URL:
http://norandomwalking.net/nrwk/chart.php?s=GRS&l=3m&width=600&ref=^IXIC|GLD|GDX&tt=20090615will result in a 600-pixel-wide chart for stock GRS, using 3 month data length, up to June 15, 2009, and with a combination of ^IXIC, GLD, GDX as the references.
A partial list of acceptable options are:
| Option Key | Description | Default Value | Example |
|---|---|---|---|
| s | specify stock symbol, case insensitive. For Chinese and HK stocks, extensition .SS, .SZ and .HK optional (in most cases). | None, i.e., required. | s=IBM s=600036 (Chinese A-share stock implied) s=600036.SS (explicit) |
| width | Chart width in number of pixels. | User-preference or system default (550). | width=700 |
| l | Chart data length | 6m (six months) | l=180 l=1y l=3m |
| ts | time shift, in number of days | 0 | ts=200: chart of 200-day's ago |
| tt | time to | [today] | tt=20090615: chart ending on the specified date |
| price | manually setting the latest closing price | automatically obtained from the net | price=25.23 |
| clr | Candle-stick color style, either US or China style | User-customized value or system-determined value based on symbol extension. | clr=0 clr=1 |
| cndl | How quotes are plotted. For Flash chart only. | 0=Line; 1=Candle Stick(default); 2=Bar | cndl=0 |
| cf | Chart graphics format | 2=PNG image format; 3=Flash interactive chart(default). | cf=2 |
| yer | Chart Y-axis expansion ratio | A floating point number greater than 1. Default: 1.2 | yer=1.1 |
| postscript |
Run additional commands, separated by semicolon, after the default commands are completed.
[This option is meant for advanced users only, i.e., myself!] |
none | Example 1: postscript=PLOT BBAND()
to plot a bollinger band with default parameters;
Example 2: postscript=PLOT BBAND();PLOT EMA(50) COLOR=FF00FF,THICKNESS=4
|
| The following parameters are specific to RSAP model: | |||
| ref | specify one or more references | a list of market indices | ref=^GSPC ref=GLD|GDX|^GSPC |
| np | Number of points used for regression analysis | positive integer (default: 15) | np=30 | rc | Return cutoff | floating number between 0 and 1(default) | rc=0.08 |
| md | Report model details so that other information can be calculated and plotted. | 0 or 1 | md=1&postscript=PLOT GETVALUE(GOODNESS)
to report r-square values (between 0 and 1). Other information include 'MODEL'. |
| The following parameters are specific to divergence calculation: | |||
| lag0 | number of lags to skip in divergence detection | positive integer, default=3 | lag0=10 |
Using The Indicators In Examples
It is very important to note that investing involves a lot more than reading charts. Asset management, risk analysis and fundamental analysis are actually far more important than timing a stock purchase or sale.
The following is an example, using ASIA (AsiaInfo) as an example, focusing on how chart can be a very important complimentary tool in the process of stock investing.
[to be continued ...]
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