Yes I see that too. So I ran a second chart from StockCharts.com on INTC using ATR (Average Trading Range)
stockcharts.com[h,a]daclyyay[d20010829,20020429][pb50,200!d20,2][vc60][iUb14!Ur14!La12,26,9]&pref=G
stockcharts.com
Developed by J. Welles Wilder and introduced in his book, New Concepts in Technical Trading Systems (1978), the Average True Range (ATR) indicator measures a security's volatility. As such, the indicator does not provide an indication of price direction or duration, simply the degree of price movement or volatility.
As with most of his indicators, Wilder designed ATR with commodities and daily prices in mind. In 1978, commodities were frequently more volatile than stocks. However, recent Nasdaq price action may belie that notion. In addition, commodities were (and still are) often subject to gaps and limit moves. A limit move occurs when a commodity opens up or down its maximum allowed move and does not trade again until the next session. The resulting bar or candlestick would simply be a small dash. In order to accurately reflect the volatility associated with commodities, Wilder sought to account for gaps, limit moves and small high/low ranges in his calculations. A volatility formula based on only the high/low range would fail to capture the actual volatility created by the gap or limit move.
Wilder defined the true range (TR) as the greatest of the following:
The current high less the current low.
The absolute value of: current high less the previous close.
The absolute value of: current low less the previous close.
If the current high/low range is large, chances are it will be used as the TR. If the current high/low range is small, it is likely that one of the other two methods would be used to calculate the TR. The last two possibilities usually arise when the previous close is greater than the current high (signaling a potential gap down and/or limit move) or the previous close is lower than the current low (signaling a potential gap up and/or limit move). To ensure positive numbers, absolute values were applied to differences.
Much more that cannot be shown plus...
SharpChart Application: Using SharpCharts, the ATR can be set as an indicator above or below a security's price plot. The only variable necessary is the number of periods and the first box to the right can be used to make adjustments. The default setting is 14 periods and the indicator can be used on intraday, daily, weekly or monthly charts. The scale is set in absolute (not percentage) price increments based on price changes in the selected security. The lower the price is, the smaller the scale on the ATR.
Special note: Because the ATR shows volatility as an absolute level (versus percentage), low price stocks will have lower ATR levels than high price stocks. For example, a $10 security would have a much lower ATR reading than a $200 stock. Because of this, ATR readings can be difficult to compare across a range of securities. Even for a single security, large price movements, such as a decline from 70 to 20, can make long-term ATR comparisons problematical. |
