Technical Indicators: B
Beta Coefficient
The Beta Coefficient measures the systematic risk of a security. It is used to illustrate the relative volatility of a security (or portfolio) in comparison with the market as a whole. As the benchmark of this measurement, the market is defined of having a beta of 1.0.
A security with a Beta value >1.0 is indicative of a security that is more volatile than the market. A Beta < 1.0 is then less volatile than the market. If the Beta = 1.0, the security's price is said to move along with the market.
Beta2
Beta2 is a measure of the systematic risk of a security, much like the Beta Coefficient. The difference between Beta and Beta2 being that instead of using the Simple Rate of Change, Beta2 uses the Moving Average of the Rate of Change in its calculation.
Remember, with either form of Beta, securities with a value >1.0 will be more volitile than the market. A Beta < 1.0 is said to be less volatile than the market.
Bollinger Bands
Similar to Moving Average Envelopes, Bollinger Bands are plotted at 2 standard deviations above and below a 20-day exponential moving average. As standard deviation is a measure of volatility, the bands are self-adjusting: widening during volatile markets and contracting during calmer periods.
As a rule, prices are considered to be overextended on the upside ("overbought") when they touch the upper band. They are considered overextended on the downside ("oversold") when they touch the lower band. Using two standard deviations ensures that 95% of the price data will fall between the two trading bands.
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The simplest way to use Bollinger Bands is to use the upper and lower bands as price targets. In other words, if prices bounce off the lower band and cross above the 20 day average, then the upper band becomes the upper price target.
A crossing below the 20 day average would identify the lower band as the downside target. In a strong uptrend, prices will usually fluctuate between the upper band and the 20 day average. In that case, a crossing below the 20 day average warns of a trend reversal to the downside.
As Bollinger Bands creator John Bollinger noted - a move that originates at one band tends to go all the way to the other band. This observation is useful when projecting price targets.
Breadth Thrust Indicator
The Breadth Thrust Indicator is a market momentum indicator. Calculated by dividing a 10-day exponential moving average of the number of advancing issues by the number of advancing plus declining issues, a "Breadth Thrust" occurs when the indicator rises from below 40% to above 61.5%. This indicates that the market has rapidly changed from an oversold condition to one of strength yet has not become overbought.
The Breadth Thrust Indicator was developed by Dr. Martin Zweig who points out that most bull markets begin with a Breadth Thrust. According to Zweig there have only been fourteen Breadth Thrusts in the S&P 500 since 1945 with an average gain of 24.6% following these Thrusts.
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