CHAPTER 6

Key Indicators

Price is the only key that leads the direction of trend. There is nothing on a chart that matters more than price.

Data of daily transactions of prices are generally reported with information of the price range consisting of open-high-low-close, volume, and turnover of shares. The information is then used as the basis for calculating indicators.

All indicators in technical analysis are mathematical attempts to predict the future trend of stock prices based on historical data. Indicators are used as added value to the analysis of price movements to form buying and selling decisions. Indicators are not indubitable and should only be used as handy tools. In calculating indicators, it is important to ensure that price data are adjusted accordingly if there are changes to the company’s equities as a result of schemes of arrangements, rights issues, or bonus issues. It is also necessary to make adjustments to the data when trading in the shares is suspended. Such suspension may last from one day to several months. If the price data are not adjusted, especially when trading in the shares is suspended for a long period, it is not advisable to do any wave count or any reading of the indicators or patterns following the resumption of trading.

Figures 6.1 and 6.2 show two charts of a stock whose shares have been suspended for trading. Note the differences in the patterns of price and indicators before and after adjustments of the price data due to the suspension of ...

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