I noticed that, too, and wondered. You'll have to ask Bill for the definitive answer -- I can only guess. Average Price 1 is, in a way, one of the special ingredients in BNS. It's derived from the formula for Average Price, which is really just a formula for CCI. When Paul successfully translated a plot on Bill's charts, he discovered Average Price 1, which was the CCI formula with the parentheses left out of the denominator. The missing parentheses cause big moves in Average Price 1 when the stock is volatile, when standard deviation is high. You can see this in a long-term chart of IOM. Average Price 1 doesn't really move until the big breakout. So Average Price 1 is a telltale indicator -- when it's on the move, something is up. So in a way, I suppose it can be used to add perspective to the other indicators. Bill might have put it in the second window to see whether the movements of the RedLine indicator (Stoch(8,3) in WOW) were significant, whether anything was really going on, or whether it was just moving in a range, and in the third window to compare it with the other average price formulas.
In the second window, Average Price 1 is paired with the real force behind it, standard deviation, and those two indicators help evaluate whether RedLine is just bouncing around, getting nowhere. In the third window, Bill brings out his full arsenal of Average Price formulas, to see if things are really on the move. He sure has worked out a powerful system.
Your question inspired me to look at some long-term charts, and you can really see Average Price 1 at work. Look at AMAT, today's star performer, for example. And look at MU, which tried to give an encore, but Average Price 1 just wasn't really into it. And AMTX -- Average Price 1 is really in for the ride with that stock. |
