Brainy's Trading News and BullCharts Tips Monthly e-newsletters 31 Mar 2009 Special preview of Brainy's monthly articles This pdf file contains only the first page of each of the articles that are available in this month's enewsletter for subscribers. This special preview is available for anyone to peruse. Please feel free to forward it to anyone else no problem. The sad news is that if you want to see the subsequent pages in each article, you need to subscribe. A lot of work goes into their preparation, so we can't just give them away for free. For more details, please visit my web site: http://www.robertbrain.com Successful investing, Robert (Brainy) Brain File Name: enewsxx_preview.odt Printed: 1 Apr 2009 Copyright 2009, Robert Brain. These notes available by subscription. See: www.robertbrain.com
Share Trading Correlation ST-6150 page 1 of 3 26 Mar 2009 The topic of correlation is a useful one for traders and investors to understand. It can help to reduce risk in an investment portfolio. It can also be used as the basis of a trading strategy. This article in Brainy's series on Share Trading (number ST-6150) provides an introduction to correlation. As it is a complex topic, the reader is encouraged to seek more information from other sources. What is correlation? In fairly simple terms, correlation is a measure of how closely two specific items track each other. For example, we might expect that two large and similar global mining companies like BHP and RIO might have price charts that somewhat resemble each other. Have a look at the price chart below where the price charts of these two companies are superimposed. We can see that over the period from December 2008 to March 2009 the prices of the two stocks did basically track each other, with a little variation at times. But, even after the price of the two stocks might deviate for a while (as in late February), they eventually return. You can notice on this price chart that the two stocks have very different share prices. The BHP chart is shown in black, with the price axis on the right-hand side. The RIO chart is drawn in red, with the price axis on the left. There is no single point on the chart that the two stocks have in common. The vertical price axis of both is automatically scaled to fit into the available range. But, it can be seen that the up and down performance of the two stocks is very similar. That is, they are closely correlated. Figure 1: BHP and RIO on same price chart. File Name: st-6150_correlation.odt Printed: 1 Apr 2009 Copyright 2009, Robert Brain. These articles are available by subscription. See: www.robertbrain.com
Technical Analysis Bollinger Bands Indicator TA-4310 page 1 of 2 27 Mar 2009 In the world of technical analysis, there are many different indicators that can be applied to a price chart. One of these is the Bollinger Bands indicator. This article in Brainy's series on Technical Analysis (number TA-4310) provides an introduction to the Bollinger Bands indicator. Bollinger Bands Indicator The Bollinger Bands indicator was developed by John Bollinger, and looks a little similar to moving average envelopes. As you can see in the sample Weekly price chart in Figure 1 below, Bollinger Bands are comprised of three curves (the green ones in this sample) the middle curve is basically a Moving Average (typically a 20 period Simple MA), while the upper and lower bands are a distance away from the middle curve by an amount that is based on the volatility of the price. That is, the more volatile the price (that is, the greater the range in price in a bar or candle), the further apart the bands are spaced. The amount of volatility used is commonly referred to as two standard deviations of the average share price. So the resulting plot is actually moving standard-deviations plotted as bands around a moving average of the share price. Figure 1: Bollinger Bands indicator. Note the following feature in the sample price chart above. In late Oct 2003 (about the time of the start of a bull market) the Bollinger Bands had narrowed over a 9 week period, indicating a reduction in volatility. This is followed by an expansion of the bands coinciding with the Big White candle in early December, and signalling the start of a trend. This was confirmed with higher volume in the week of the Big White, and also in the following week. In the Volume pane of the price chart above (the lower section of the chart) the squiggly line running across the chart is a Moving Average of Volume. Any significant increases in Volume above this Moving Average are worth noting. Remember that a rise in Volume accompanied by a rise in share price is bullish. Bollinger Bands are usually overlaid on the Closing share prices, but they can be displayed on other values (eg. open, high or low share prices, or on the volume chart or maybe on a chart of the Trades). File Name: ta-4310_bollinger-bands.odt [Charts produced with BullCharts] Printed: 30 Mar 2009 Copyright 2009, Robert Brain. These notes available by subscription. See: www.robertbrain.com
Technical Analysis OBV Indicator TA-4410 page 1 of 2 26 Mar 2009 In the world of technical analysis, there are many different indicators that can be applied to a price chart. One of these is the On Balance Volume (OBV) indicator. This article in Brainy's series on Technical Analysis (number TA-4410) provides an introduction to the OBV indicator. OBV Indicator The OBV indicator was developed by Joseph Granville, and attempts to measure the level of accumulation and distribution by comparing volume to price movement. It is described in his book Granville's New Strategy of Daily Stock Market Timing for Maximum Profit. It works on the premise that larger traders accumulate and distribute stock in higher volumes before a move in share price. It is a measure of underlying strength, and is basically a running total of the traded volume, where the day's volume is added to the running total if the day's closing price is higher than the previous close. Conversely, if the day's close is less than yesterday's, then the volume is subtracted. Of course, this is for a daily perspective. Figure 1: OBV indicator on ANZ price chart. The same thing applies on a weekly chart the weekly total value is added to, or subtracted from, the weekly running total. A sample is shown in Figure 1 above. Note that the OBV actually made Lower Highs in late 2007, while the share price made a new high. File Name: ta-4410_obv-indicator.odt [Charts produced with BullCharts] Printed: 30 Mar 2009 Copyright 2009, Robert Brain. These notes available by subscription. See: www.robertbrain.com
BullCharts Toolbars BC-03-150 page 1 of 4 31 Mar 2009 Like any Windows software package, BullCharts has a number of toolbars comprising a large number of toolbar buttons. And as in many software packages, many of these buttons perform functions that duplicate various menu options. This enables the user to choose to use menu options, or the toolbars, or even a combination of both. In this article in Brainy's series on BullCharts (number BC-03-150) we take a look at the various toolbars in BullCharts (in BullCharts version 3.8.1). Overview There are more than 10 toolbars that can be displayed, or hidden. And some of these toolbars are customisable (eg. the Indicator toolbar, and the Template toolbar). Also, the toolbars can be docked some where around the edge of the BullCharts window, or they can float in the window. To undock a toolbar from around the edge and make it float, or to just adjust it or move it, simply use the mouse cursor to grab the funny little vertical squiggle at the left hand end of the toolbar (as in the screen shot at right). To display / hide each toolbar, use the menu option: View > Toolbars. And some of the functions on the toolbars might only function with the Live Data plan. A good overview can be obtained by simply browsing the few pages in this Toolbars article. Actions toolbar The Actions toolbar includes the following key buttons and functions (viewing from left to right across the toolbar): Chart to create a price chart. Market Depth for a given stock. Security Summary for a summary of information about the security. Quick News Search will provide a list of recent news items for the displayed security. News Desk provides a list of all recent news for all securities. Portfolios to open the portfolio manager. Security Manager same as <F8> to toggle the display of the Security Manager. BullScan Manager to toggle the display of the BullScan Manager window pane. Bull Scan toolbar This toolbar is available after running a scan to view the results of the scan. Some of these functions are also available as buttons across the top of the BullScan Manager window pane. The BullScan toolbar includes these functions (from let to right): Start running the scan. Stop running the scan. Display the properties of the scan (and allow the scan properties to be changed). Create a new chart linked to the scan results. Flip through the scan results in slideshow mode, pausing on each one. When flipping through the results, the last two buttons can be used to speed up, or slow down, flipping through the results. File Name: bc-03-150_toolbars.odt Printed: 31 Mar 2009 Copyright 2009, Robert Brain. These articles are available by subscription. See: www.robertbrain.com
BullCharts Stock Codes, Indices, Currencies BC-05-100 page 1 of 4 30 Mar 2009 We already know that BullCharts is a share price charting software package. But we might wonder exactly what sort of shares, or stocks, or other financial instruments it can chart. In this article in Brainy's series on BullCharts (number BC-05-100) we take a look at the range of stocks, market indices and currencies that can be viewed in BullCharts. A list of the available items is provided, plus some tips about how to get the latest list. Overview Just to briefly summarise, BullCharts can display price charts for the following instruments: Australian stocks Australian indices (eg. XJO, XAO, etc.) Overseas stocks Overseas indices (eg. Dow Jones Industrial, FTSE, DAX, etc.) Currencies (eg. AUD-USD). More information on what is available, and how to view them, is provided below. Where does the data come from? The first thing to understand is that the data for the Australian stocks/securities and indices is stored in the local BullCharts database on the PC along with the BullCharts software. There is no overseas stock data, or index data, stored locally. When you try to view a chart for an overseas instrument, the BullCharts software sends a request for the data over the internet to the BullCharts servers, and the data comes back for display. How to view a price chart? There are a couple of ways to view a price chart. Assuming that a price chart is already displayed, you can do one of the following: Click in the Symbol entry field in the Security Toolbar and type the symbol code (see Figure 1 at right). In the Security Manager, click on an entry (eg. any of the items as shown in Figure 2 at right). Use the menu option: View > Change Symbol (or function key F4). Figure 1: Security Toolbar. Australian Stocks BullCharts is primarily used to view (and analyse) price charts for the stocks (ie. securities) that comprise the Australian stock market. A list of these is available in BullCharts in the Security Manager window pane (see the screen shot in Figure 2 at right, noting that All Securities is selected in the upper portion of the window pane). As at late March 2009, the Securities Manager pane (at right) shows a total count of 2453 Securities near the bottom of the view. Now this list includes: regular stocks (eg. the miners, banks, etc., etc.), plus all the Australian indices, plus items like AAEDA (shown in the figure at right) which is the Agri Energy Limited Deferred Settlement stock. It is important to remember that you can manipulate and resize Figure 2: List of securities in Security Manager. File Name: bc-05-100_stock-codes.odt Printed: 1 Apr 2009 Copyright 2009, Robert Brain. These articles are available by subscription. See: www.robertbrain.com