moving average and rate of change (roc)
TRANSCRIPT
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Technical AnalysisMoving Averages, ROC
By
Ayush Kansal (I068)
Varsha Sharma (I072)
NMIMS MUMBAI
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Flow of presentation
• Moving Average
• Index and Stock price moving average
• Buy and Sell Signal by stock price and stock price moving average.
• Buy and sell signal from two moving average
• Oscillators
• Relative Strength Index (RSI)
• Rate of change
• Conclusion
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Moving Average
Moving average is an indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations.
• Used for smoothening of data.
• Takes series of arithmetic mean over time.
• Closing price of stock used.
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Key points
• Used to understand the movement of market and individual scrip price.
• Indicates the underlying trend in the scrip.
• Short term trend- 10 to 30 days moving Average.
• Medium term trend- 50 to 125 days moving average used.
• Long term trend- 200 days moving average
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Index and Stock price moving average
Bullish trend
• If Index is above stock’s moving average line.
• Prices may increase above the market average.
Bearish Trend
• If index is below stock moving average
• Prices may fall.
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Buy and Sell Signal by stock price and stock price moving average.
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Buy and sell signal from two moving average
Short term Moving average
Long term Moving average
Sell
Buy
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Oscillators
• It indicate market momentum or scrip momentum
Momentum indicates
Overbought and oversold conditions of scrip.
Signaling the possible trend reversal.
Rise or decline in the momentum.
• Common oscillators are MACD, ROC, RSI, CCI.
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Relative Strength Index (RSI)
• Measures the speed and change of price movements.
• Oscillates between zero and 100
• RSI is considered overbought when above 70 and oversold when below 30
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Calculation
RSI=100 - 100 1+RS
RS = Average Gain / Average Loss
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Interpretation
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Rate of change
• Measures the percent change in price from one period to the next
• Compares the current price with the price “n” periods ago
• Moves from positive to negative
• ROC signals include center line crossovers, divergences and overbought-oversold readings
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Calculation
ROC = [(Today’s price) / (Close n periods ago)] * 100
ROC = [(today’s price) / (Close n periods ago)] * 100 -100
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Overbought/Oversold Extremes
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Conclusion
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Thank You