Watchlists can be helpful but don’t always provide a sense of market sentiment
The High/Low Graph, now on the thinkorswim® platform, uses a formula to help track sentiment for individual securities
This feature could help investors who need to quickly check sentiment for securities in their watchlists
If you’ve ever created a watchlist to track multiple securities, you probably know how helpful it can be to have so much information in one place. But one thing a watchlist generally can’t tell you is the sentiment behind the securities. Now, the High/Low Graph—a new feature available on the thinkorswim platform—can help fill in that missing element.
Tracking multiple securities can be a challenge. That’s one reason many investors lump groups of securities into watchlists. Watchlists can provide at-a-glance, real-time data such as current price, net change, highs and lows, volume, and more to offer a quick update on how a set of securities is performing.
But another essential bit of info that investors often seek is whether a security looks bullish or bearish. Most of the information on a watchlist, such as current price and net change, might not provide that picture. What may be missing is a snapshot of the buying and selling pressure driving a particular security’s price—both of which may be taken as one important proxy for bullish or bearish sentiment.
And unless you take the time to look at each security’s individual chart—a potentially time-consuming task if you’re following more than a few securities—you may not be able to make a reliable assessment of the sentiment dynamic. Is there a more rapid way to gauge the buying and selling pressure behind a security’s price movements within a watchlist? Now, the answer is yes. This is where the High/Low Graph comes in.
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Introducing the High/Low Graph
The High/Low Graph measures the quality of a security’s current price relative to the buying/selling activity taking place within its entire trading range in a given time period.
The High/Low Graph represents this “qualitative” state as a number between +100% (highest) to -100% (lowest). As a representation of the buying and selling pressure behind a security’s price movements, the High-Low Graph can also potentially indicate a security’s bullishness or bearishness.
- +100%, the highest measure: Indicates that price and range of movement was driven mostly by buyers.-100%, the lowest measure: Indicates that a security’s price and range of movement was driven mostly by sellers.
Let’s take a simple hypothetical example, using two stocks with identical gains but contrasting High/Low Graph profiles. We’ll call the first stock JKT, and the second stock XYZ.
- Stock JKT opened at a price of $20.00 and closed at $20.50.Stock XYZ also opened at a price of $20.00 and closed at $20.50.
If both stocks gained exactly 50 cents, can we say that both stocks were identically bullish? Not so fast. According to the High/Low Graph, stock JKT had a potentially bullish reading of 100%, while stock XYZ had a potentially bearish reading of -50%. But if both stocks gained 50 cents, why are their High/Low Graph readings so different?
Here’s what happened behind the typical watchlist scenes:
- Stock JKT opened at $20, immediately sold off to $19.25 (its lowest low), and rose again to its highest high and closing price of $20.50.Stock XYZ also opened at $20. But unlike ABC, it initially soared to a high of $22.00 (its highest high), at which point heavy selling activity pushed its price back down to $20.50, where it closed.
The takeaway: while stock JKT’s closing price was driven mostly by buyers (pushing the price up), stock XYZ’s closing price was driven mostly by sellers (pushing the price down). So despite equal gains in both stocks, the High/Low Graph differentiated the two stocks by sentiment, designating ABC with a positive number and XYZ with a negative number.
Perhaps the best way to see how the High/Low Graph works is to see it in action, comparing a stock’s net change with the graph’s negative or positive measures. So here’s how to set it up on thinkorswim.
Setting Up the High/Low Graph
Step 1: Pull up a Quotes watchlist
- Click on the MarketWatch tab on your dashboard.Click on Quotes to open your Quotes window (your securities watchlist).Note that if you do not have a current watchlist, you can choose a default watchlist provided by the platform, or you can build one by adding securities to your list.
Step 2: Pull up the Customize Quotes window
- Right-click on any of the sub-tabs on the watchlist (see figure 1).Click on Customize to open the dialog.
FIGURE 1: ADDING THE HIGH/LOW GRAPH. Image source: the TD Ameritrade thinkorswim platform. For illustrative purposes only. Past performance does not guarantee future results.
- In the dialog, scroll through the Available Items to find High/Low Graph (see figure 2).Click to highlight, then click “Add Item(s)” below the list.The High/Low Graph should appear under “Current Set” on the right.You can shuffle the order of any of the items in the Current Set by simply clicking and dragging them up or down. (Information on the topmost position will be displayed on the left of your watchlist screen; the subsequent levels follow in sequence to the right.)You can also click on the section designated “length” to select your preferred time frame (figure 2).
FIGURE 2: ADJUSTING THE TIME FRAME. Image source: the TD Ameritrade thinkorswim platform. For illustrative purposes only. Past performance does not guarantee future results.
- Once you’re satisfied with your settings, click the green “OK” button at the bottom right to finalize and close the dialog.The High/Low Graph should now appear on your Quotes dashboard, as shown in figure 1.If you mouse over the High/Low Graph cell for a given security, the percentage will pop up.
As with any indicator, the High/Low Graph provides you with only a partial composite of a much larger picture. So if you decide to use this technical analysis indicator to help assess a security’s performance, be sure to consider other technical or fundamental factors to get a clearer and more well-rounded perspective.