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Joe,
What about candlevolume charting?
Steve Karnish
CCT
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> From: Joseph Ehardt <jehardt@xxxxxxxxxxxxxx>
> To: MetaStock Discussion <metastock@xxxxxxxxxxxxx>
> Subject: NYSE Composite with New Volume Indicator
> Date: Thursday, March 18, 1999 9:19 AM
>
>
> Good morning, fellow MSers,
>
> As many of you can gather from my occasional posts of the NYSE Composite
> Index with official exhange advancing-declining volume data, yesterday
> being the most recent one, I feel that price should be evaluated in the
> context of volume information. Price alone tells only half the story,
maybe
> even less than half the story. This belief of mine leads to the next few
> comments.
>
> How can I understand the affect of volume on individual stocks, which are
> my primary trading devices? Only occasionally do I trade the indexes in
the
> form of SPDRs, such as DIA, SPY, MDY, QQQ, and XLK. But everything I do
> trade has volume, and yet there is no official source for how much volume
> involved declining price trades and how much involved rising price
trades.
> By looking at Time and Sales data, one can make an approximation of how
to
> distribute volume between advancing, declining, and unchanged trades, BUT
> there is no historical source of time and sales data from the exchanges,
> yet alone for indiviual equities.
>
> I would like to approximate this allocation if I want to attempt to
> meaningfully use volume in conjunction with price data. Other technical
> analysts have preceded me on this issue. Joseph Granville created the OBV
> (On Balance Volume) some time ago, but it crudely approximates what I am
> looking for because it considers ALL daily volume of a stock that closes
up
> on the day to be advancing volume, and all daily volume of a stock that
> closes down on the day to be declining volume. Very crude, indeed. OBV is
> available in Metastock, and there is another indicator called
> ACCUMULATION/DISTRIBUTION which MS includes. This indicator makes a
better
> effort by allocating volume between advancing and declining varieties
> according to the following formula:
>
> the cumulative sum of [ { ( (close-low) - (high-close) ) / (high - low)
}
> * daily volume ]
>
> It is a definite improvement of the OBV indicator, and yet it does not
> satisfy me completely. I don't like its allocation formula in numerous
> situations.
>
> What I think is important about price pattern is influenced by Japanese
> Candlestick theory. That is to say, I believe that where a stock opens,
> trades to a high price and low price for the day, and then closes
somewhere
> within that context, it is that "picture" which I believe is very
> revealing. The MS ACCUM-DIST indicator allocates volume according to
HIGH,
> LOW, and CLOSE information, but not consider the importance of the OPEN.
>
> I have "created" (only because I am unaware of someone else of having
> devised the formula that I am using) what I call the Cumulative Allocated
> Volume Indicator, which in the Japanese Candlestick sense of things
> examines the body (the range between the open and closing price) in the
> specific context of the embodying "stick" (the range between the high and
> low price). By prorating the daily volume to advancing, declining, and
> unchanged categories in a manner I have calculated, and then accumulating
> them into a simple variant of the Cumulative Advance-Decline Volume
> Indicator (which we only get for a few exchange indices), I can produce
> what I believe is a picture of whether buying (accumulating) or selling
> (distribution) is driving the specific stock or index.
>
> What I have attached is a chart that portrays my indicator, and it
clearly
> suggests that buying has been driving this market higher in a
NON-divergent
> way, in stark opposition to the simple Cumulative A-D line and the
> Cumulative A-D Volume line. Moreover, IF (because I haven't been able to
> find the definitive answer) the NYSE compiles advancing, declining, and
> unchanged volume simply by doing the OBV of each equity in the Composite
> Index, then my study may be far more accurate than the official exchange
> data, which is included again today as the second chart for comparison
> purposes.
>
> Thought you might be interested.
>
> Joe
>
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