Technical analysis II
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69810002
20. Price minus average
If you take a price chart and superimpose the moving average over the top, you will see the price is sometimes above the average and at other times below. The Price Minus Average is simply the difference between the two.
The value of the PMA is that it allows you to see clearly how big the difference is between the current price and a long term average figure.
The price minus average chart for Hanson
Click here for the full size graph.
To obtain buy and sell signals, you have the same options as you did with the momentum indicator.
- For lagging buy and sell signals you may consider buying whenever the ROC line cuts downwards across the zero line into negative figures, and consider selling when it cuts upwards across the zero line into positive figures.
- For leading buy and sell signals, you need to convert the ROC indicator figures into ROC oscillator figures. Divide each ROC figure by the larger of the maximum or minimum obtained over the period, and plot the results. Then sell when the oscillator reaches 0.8 and buy when it reaches -0.8.
Recommend Reading
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