Sunday, July 30, 2017

The volatility.

The volatility is an important parameter in the financial markets. 
It is useful to : 
  • measure the underlying risk of an asset or portfolio (higher the volatility, higher the risk);
  • set the market orders, stop loss, take profit, limit orders and so on (higher the volatility, "wider" the market orders) ;
  • set the trading profile (higher the volatility with pure trader strategy and lower the volatility with pure investor strategy) ;  
  • measure the market mood (higher the volatility with an important event price-sensitive ; "stock market fever", see also the VIX indicator). 
As there are so many purposes, in the same way, there are so many methods of measuring and indentifying it. At first, the classical measure is the deviation standard. To calculate it, it needs to import the historical returns of an asset to an Excel spreadsheet and then applying the following formula :

=  DEV.ST.POP (historical returns).

Historical data from
Here, we have an image that clearly explains the case. The time-period can be daily, weekly, monthly etc, in the analyst's discretion and based on the purpose of the analysis (it means also holding period and investor perspectives). The ticker is APPLE. The time-frame is daily. 

Another measure is that provided by the graph (indicators).  
In this sense, it means respectively : 
  • width of the real bodies and of the shadows (candlesticks chart ; wider the bodies and the shadows, higher the volatility) ;
  • width of the Bollingers Bands (wider the bands, higher the volatility) ;
  • magnitude of the volumes and so market interest (higher the volumes, higher the volatility). 
As shown in the following chart, there is the silmultaneous presence of more detectors (read the notes inside the graph). 

Chart from

Indeed, BBW and HV are useful indicators to measure the volatility. There is a peak compared to the historical series (circled ellipses). The Envelopes (EV) have the same meaning of the BB : if the stock price is above or below the envelopes, there is high volatility in both directions.

Envelopes (EV) ; chart from

To conclude, once measured and identified the volatility, every trader/investor should set his trading strategy accordingly, pursuing own profit and loss targets, of course. 

Saturday, July 29, 2017

IMA S.p.A. : chart framework.

About the chart of IMA, we can notice a strong uptrend that began on October 2014 and it is still valid, from area 25 EUR to area 85 EUR. The great fundamentals of the firm have supported the good stock performance : it means good management and good shareholders remuneration, anti-cyclical business, good (geographical) diversification and uncorrelation from macro-events and italian economy (low beta). 
For further info, visit the official website (section investor-relations).
Of course, we got some breaks but we can consider them as small retracements that didn't damage the bullish trend. As shown in the chart, we have a primary trend with a parallel channel broke in area 70 EUR that brought the stock to the secondary trend with its parallel channel. The uptrend is also confirmed by the overcoming of the resistances (and of the resistance trasformed into the support).

Chart from

Only with a break of area 85 EUR, it will be a continuation of the uptrend and only with a break of area 70 EUR, it will be a change in the trend : as usual, it needs other confirmations and volumes to more validate the signal. For this purpose, see also the chart with the FIBO levels.

Chart from

With a LOG scale, we can appreciate clearly the chart framework (it is substantially the same as the previous chart). Indeed, the LOG scale is reccomended with long-term analysis and with great price excursions (it suits our case). Otherwise, the LINEAR scale is used for indentifying price levels, focusing on the absolute values and not on the relative values of the prices, like the LOG scale.

Chart from

In other words, the LOG scale smoothes the market excesses. 
To know more about it, consult the following link : 
The slope and the structure of the EMA bundle certify the uptrend, too.

Chart from

Anyway, in my opinion, I would await for the next market movements, in one direction or another : see the following chart. The overcoming of the BB allows only a trading range between area 75 EUR and 85 EUR (in this sense, in the short-term, it lacks a consolidated trend setting, of course). The uptrend is strong and it is almost immaculate, in the long-term.

Chart from