Beware of Charts Which Have Not Been Adjusted for Dividends
by TraderMike over 1 year ago
Most of the time it doesn't make much difference it a chart has been adjusted for dividends or not. That changes when a company issues a large dividend -- which happed with ZIM last week. If you adjust for dividends (as one should!), the chart shows that the stock is at multi-month highs. If the chart was not adjusted, the charts shows a big gap down last week and shows a stock that's trying to recover that gap.
Here's how it looks on TradingView, which doesn't adjust for dividends:
and here's the Yahoo Finance version (also not dividend-adjusted):
These dividend-adjusted charts show the true story of ZIM. From StockCharts.com:
And here's the SwingTradeBot chart (which you can see if you use the pop-up / hover charts on scan results & on the full-page of charts pages):
Importantly that dividend-adjusted data is what's used to determine all of SwingTradeBot's signals, the trend table, etc. As you can see, on the non-adjusted charts, ZIM is below its 20 & 50-day moving averages but in actuality it's well above those lines.
P.S. You can also see the SwingTradeBot chart by hovering (or tapping on mobile device) on the little chart icon after "Basic Chart" which is under the TradingView Chart on each stock's page. See below:
Here's how it looks on TradingView, which doesn't adjust for dividends:
P.S. You can also see the SwingTradeBot chart by hovering (or tapping on mobile device) on the little chart icon after "Basic Chart" which is under the TradingView Chart on each stock's page. See below:
T
TraderMike over 1 year ago
For example, if a stock splits 2-for-1, the price is suddenly half of what it used to be, creating a large gap down on the chart. If you were unaware of the split, the chart would give you the impression that something bearish happened to the underlying company. In addition, most of the technical indicators on that chart would give sell signals because of the big drop in prices. Even though such a split is generally considered a neutral event, an unadjusted chart would contain lots of bearish signals.
In order to prevent these kinds of misleading signals from appearing on our charts, we adjust all the historical data prior to the event. In the case of a 2-for-1 split, we divide all of the historical prices for the stock by 2, then multiply all of the historical volume by 2 so that the bars prior to the split match up smoothly with the bars that appear after the split.
In addition to performing adjustments that remove large gaps caused by splits, we also adjust our historical data to remove smaller gaps caused by dividends and distributions. By making these additional adjustments, we ensure that all price movements on our charts are caused by pure market forces - that is, the forces that Technical Analysis attempts to identify.
Recent Comments
- TraderMike on Volume Surge
- CrootsterOZ on Volume Surge
- TraderMike on QMCO
- TraderMike on BOOT
- Dr_Duru on BOOT
From the Blog
Featured Articles