Technical analysis II

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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.

1. Average share prices 2. Moving averages 3. Weighted moving averages 4. Where to plot moving averages 5. Interpreting moving averages - the basics 6. Classic interpretation of moving averages 7. Combining short and long term moving averages 8. Moving average convergence/divergence (MACD) 9. Reversal patterns 10. Head and shoulders top 11. Head and shoulders bottom 12. Double top 13. Double bottom 14. Rounding tops and bottoms 15. Broadening formations 16. Wedge formations 17. The momentum indicator 18. The momentum oscillator 19. Rate of change indicator 20. Price minus average 21. Relative strength indicator 22. Conclusion

• Martin Pring's Introduction to Technical Analysis: Seminar and Workbook
• Technical Analysis Plain and Simple
• Technical Analysis of the Financial Markets
• Technical Analysis