Monday, June 2, 2014

Long Term Apple Charting:

If I had to produce a technical analysis exam – I would only ask one question: When looking at a bar chart what scale do you use? Pick one.

1- Linear Scale Always
2- Semi log Scale Always
3- It don’t matter
4- Up Trends use Linear Scale – and - Down Trends use Semi Log Scale
5- Up Trends use Semi Log Scale – and - Down Trends use Linear Scale

I and many other experienced technical analysts will always go with #2 Semi Log Scale Always. If you are a business media reporter you may choose #1 so as not to confuse your reader / viewers,If you are selling mutual funds you may chose #4 because the up-trends look bigger than the down-trends and If you are an investor advocate you may chose #5 because the up-trends look smaller than the down-trends

If you pick #3 you are likely to be an accountant or, a financial planner

This is a repeat of an Apple Inc item on chart scale selection I did 2-yers ago – only the charts have been up-dated:

“Much has been said about the recent advance in the shares of Apple Inc. with the big focus on the February to March non-stop run from $400 to $600. Now with Apple paying a dividend there are views on a transition of Apple from a growth company into a value cash cow that will spin of cash to the shareholders, A few days ago on business TV a technical analyst referred to the recent advance to be “parabolic” and warned of a probable nasty correction – see chart below.”


“The technical analyst made a common error – typical in the industry in that he is using the incorrect scale. The rule is if the price data in the window doubles – use a semi log scale. Linear scales are OK for TV and newspapers but not OK for proper trend analysis.
Our second Apple chart below clearly displays Apple in a defined secular advance within the center of a long term growth channel. The so-called parabolic run has vanished.”

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