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Chuck Rademacher has often mentioned the perils of adjusted price data
and he keeps unadjusted prices (close price only I think) in his
extensive database.
I came upon something just now that illuminates his comments.
I have a Stochastics RSI indicator from Chas Richards Headsup file and
it is:
Low1=LLV(C,21);
High1=HHV(C,21);
RSISTO=(EMA(100*(C - Low1)/(High1 - Low1+0.0001),13)/2) +
(RSIa(C,14)/2);
I plot this in IB and do an explore using it and some other factors.
Today, TARO popped up on my explore as a buy, and when I looked at my
collection of plotted indicators, RSISTO was "Empty" (flat line).
After some detective work, I discovered that back in 1990, the adjusted
close prices produced a situation where the Low1 = the High1 in the
above equation, giving it a empty value that never corrected itself.
The 0.0001 factor in the above equation was NOT in my original equation,
but will serve to avoid division by zero.
A further explore showed this to be the only stock in a 1700+ symbol
watchlist, but nonetheless, it might occur on some other symbol and
points out the lack of credibility (or lack thereof) of adjusted prices
that drop down into the pennies level.
Just for your information.....
Ken
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