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John's eSignal Chart Window Set-Up
To get a good feeling for what's going on with a stock, I divide
my main eSignal chart window into four clips, each emphasizing a
different view of the data: Price action, money flow, volatility
and volume.
 The
top clip occupies half the window and contains a candlestick chart
of price with 20-day, 2-standard-deviation Bollinger Bands. The
candles are a really good depiction of the trading process, and
the bands define high and low on a relative basis. In addition,
a relative strength line is overlaid in this clip to assess how
the stock is doing in relation to the market. I use the S&P
500, $SPX, most of the time, but another index might be better in
some situations. For instance, use the NASDAQ Composite, $COMPQ,
if you are looking at over-the-counter stocks.
The second clip contains a volume indicator, Intraday Intensity
(II). This helps diagnose tags of the bands. The idea is to look
for confirmation, or a lack of it -- strong money flow and a tag
of the upper band is confirmed strength while weak money flow and
a tag of the lower band is confirmed weakness. You could also try
using a volume oscillator, such as a 14-day Money Flow Index (MFI)
instead of II.
The third clip contains BandWidth, which depicts the overall level
of volatility. Pay close attention when volatility is at very low
levels because big moves often arise from low volatility situations.
Also, peaks in volatility often mark the end of important moves.
The fourth clip contains a normalized volume plot. By relating
volume to price action, you can get a feel for strength and conviction.
This is especially important for breakouts, where you want to see
strong volume confirm price action or for pullbacks, where you want
to see volume dry up.
All of these tools can be found in the Formulas\Bollinger directory
in your eSignal application. And, of course, there are also many
more tools available in the Bollinger Band Tool Kit, which you can
add on to your eSignal application.
This series of views in the chart window lets you get a handle
on what's happening with a stock in short order. For variations,
try plotting accumulation distribution instead of Intraday Intensity.
Or, try adding a fifth clip with a momentum indicator, such as a
stochastic or rate of change. Another improvement might be to add
a longer-term average to the price clip to aid in trend determination
(for example, a 50- or 200-day average).
This view uses daily data because that is the time frame I am most
comfortable with. However, this approach can by used on 5-minute
bars, hourly bars, weekly bars, and so forth. You may have to adjust
the constants to suit your approach, but the basic view should work
in most time frames.
For colors, I prefer a white background with a light-gray grid.
The idea here is to pick something that lets the data stand out
clearly without being jarring. Be kind to your eyes!
Finally, I don't like to have too many data points on the screen;
it gets too cluttered. To see longer time spans, I prefer to use
weekly or monthly bars rather than squeeze a lot of daily bars onto
the screen.
Find
out more about Bollinger Bands and Bollinger's Normalized Volume,
which come with eSignal.
Learn
more about the Bollinger Band Tool Kit, a premium add-on to eSignal.
Read
about John Bollinger's Group Power, a news service available to
add to eSignal.
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