Reprinted with permission from Technical Analysis of STOCKS & COMMODITIES
magazine. © 1996 Technical Analysis Inc., 4757 California Ave. SW, Seattle,
WA 98116, (800) 832-4642.
June 1996
PRODUCT REVIEW
Insider TA
Version 2.10
Insider TA is a low-cost, animated charting program from Stock Blocks.
The software allows graphical customization and optimization of parameters
using a form of box charting, so with the manipulation of box shapes we can
see the relationships of the boxes displayed.
STOCK BLOCKS, INC.
P.O. Box 416
North Stonington, CT 06359
Phone:
860 889-6398
E-mail:
support@stockblocks.com
Internet:
http://www.stockblocks.com/
Product:
Technical analysis and stock trading program using volume.
Equipment requirements:
386 or higher IBM-PC compatible processor (Web page specifies
486) with DOS 3.3 or higher, 2 MB RAM, VGA graphics, Microsoft-compatible two-button
mouse and 2.5 MB hard disk space.
by John Sweeney
Volume, volume, volume! Not since technician Richard Arms introduced Equivolume
charting has anyone focused as intently on volume as the developers of Stock
Blocks have. Naturally, in this age of computers, they've incorporated all the
results of their work into software, resulting in a program called Insider TA.
In Stock Blocks' box charting, the vertical bar on your chart is still the
price; in this case, it's the high and low. The horizontal x-axis, however,
is merely the sequence of days, days that grow longer on high-volume days and
shorter on low-volume days. The result is a chart with rectangular shapes that
capture price in height and volume in width - that is, boxes (Figure 1).
Figure 1: BOXES. Volume and price merge as AHP trades in late 1995. Insider
TA focuses on volume-oriented information for its trading analysis and recommendations.
Once the box sizes are calculated, Insider TA goes on to calculate the box ratio,
which is the ratio of height to width or dollars per unit of volume expressed
in centimeters. Being sensitive to this information is useful because of the distinctive
market price behavior that tends to accompany tall, thin boxes, a box shape that
should alert your suspicions to an overwhelming buying or selling force.
Discerning a thin box from a fat one in a full chart is often difficult, so
Insider TA has the ability to flex the scales horizontally and/or vertically
to give you the ability to adjust the screen to your own perceptions. Alternatively,
you can turn the job over to the software itself. Its Auto Adjust Boxes function
will take a box ratio you like and adjust everything on the screen to that ratio.
QUANTIFYING TRENDS
It's nice that the program allows the manipulation of box shapes so we can see
the relationships of the boxes displayed. It would also be nice to be able to
quantify those relationships so they can be viewed objectively - and as it turns
out, this is done through Insider TA's Box Analyzer function.
The Box Analyzer function normalizes both the volume and the price range against
their average values, then multiplies midpoint price movement against the normalized
box ratio before smoothing the whole affair. The result is a nifty trading signal
(Figure 2) that can be optimized with the small Optimize button concealed between
the parameter selections at the bottom left of the screen.
Figure 2: BOX ANALYSIS. Insider TA makes some great calls on Union Carbide
as the stock rocks back and forth to higher levels. Green arrows on the chart
indicate the Box Analysis function's buy and sell points.
The user has some control over the normalization process. As a point of strength
or weakness, depending on your point of view, the value you select for your moving
average is used throughout the program whenever a time horizon is needed, including
the period used for normalization. Set it to 10 and that's the number of days
used in the averaging of price range and volume. Another control lets you tweak
the number of days with which to smooth the normalized ratio. A third control
lets you adjust the number of declines or advances necessary to trigger a sell
or buy signal in the Box Analysis function. Thankfully, all of this is subject
to optimization.
I thought the Box Analysis was the most innovative and fruitful part of Insider
TA. The signals were the best of all the program's signals, and the convenience
of generating them, though not as visual as in the Volume Analyzer function,
was the greatest.
CONSOLIDATION MAPPING
One idea supported by the developers of Stock Blocks is that the volume built
up in a congestion zone should be roughly equal to the volume distributed in a
subsequent advance or decline. Following that line of thought, the program has
a tool that allows you to project when that volume will have been dispersed after
breakout from the congestion (Figure 3).
Figure 3: CONSOLIDATION MAPPING. Projections for the end of a price advance
work out as Union Carbide peaks temporarily in late 1995. Insider TA projects
the dispersal of volume accumulated in a congestion zone using a function
called consolidation mapping.
You draw a line defining the congestion as Insider TA projects forward the number
of boxes to get equal volume, extrapolating volume if you're projecting off the
chart. As you reach the point of complete dispersal, you might expect the end
to an advance or decline. While this idea is creative, perhaps this technique
should be restricted to situations where nearly all, if not all, days in the projection
period have actual volume recorded, in which case you could have a viable piece
of evidence about current price action.
VOLUME ANALYZER
Insider TA provides a function similar to on-balance volume (OBV) called Volume
Analyzer, which is plotted right over the price chart for easily checking whether
the indicator is coincident with price (Figure 4).
Figure 4: VOLUME ANALYSIS INDICATOR. US Surgical slides lower as volume
analysis moves higher. Insider TA provides an OBV-like function that is plotted
coincident with pricing for easy comparisons.
The manual suggests buying when the volume analysis indicator is high and prices
are low; conversely, when the volume analysis is low and the stock price is high,
it's time to sell.
From here, Stock Blocks goes on to create an inventive way of ranking the current
relationship of the stock's price to the volume analysis. By comparing the present
spread of the two to historical highs and lows of the difference, a function
ranking the current position in relation to past positions is created. In Stock
Blocks' philosophy, the rankings' extremes are buy and sell points.
You also have control over the Volume Ranking function. Through a clicking
device, you can adjust the number of days back to be used in summing volume,
and holding the mouse button down on the switch rapidly scrolls to get a year's
data included. Stock Blocks says that version 3.0 will totally revamp this switching
mechanism (manual entry will accompany the mouse interaction, and the overall
feel of the device will possess the refined characteristics of a Windows-like
tool).
However, other nifty features abound: You can also adjust (by more clicking)
the buy and sell levels, which are instantly reflected in the chart. You end
up with a customizable indicator whose changes make immediate revisions on the
chart. That makes visually customizing the volume analysis rank indicator feasible,
a major step up from running a non-graphic optimization or changing parameters
and flipping back to charts.
With these tools in hand, you can visually tweak the buy and sell signals to
achieve the most profitable display for the past and, thereby, the future (Figure
5).
Figure 5: VOLUME ANALYSIS RANKING INDICATOR. After tweaking the volume
analysis ranking indicator, more profitable signals are generated. Insider
TA's interface allows you to adjust indicator parameters for immediate assessment.
Stock Blocks gets credit for this innovative facility and the volume analysis
ranking idea. This program is the only place I've run across it.
CANDLESTICKS
Stock Blocks also provides a candlestick charting function in Insider TA, though
it's not standard. As Figure 6 shows, the candlestick price bars are shown without
their usual high and low tails or the usual "fill" of the body for upward or downward
price movement.
Figure 6: CANDLESTICK CHARTING. Advanced Micro Devices grinds lower in
1995.
The only difference from the usual Insider TA display is that the horizontal dimension
of the boxes is constant.
DATA
Insider TA reads ASCII files, not datafiles in their native formats. It has an
elaborate mechanism to read them, no matter what the sequence of data inside them.
It can also handle all the different ways that date, volume and pricing information
is transmitted. Insider TA's also got a fairly convenient way of manually entering
data. In addition, Stock Blocks has worked out a way to extract data from the
free end-of-day summaries published by CompuServe and Prodigy, which is no small
achievement. Nevertheless, using Insider TA version 2.10 or the new version 3.0
Standard means converting your information from your existing data formats to
ASCII on a routine basis. However, the new version 3.0 Pro of Insider TA reads
MetaStock and TC2000 files directly.
SUPPORT AND INTERFACE
Insider TA customers I checked with appreciated dealing directly with the developers
at Stock Blocks, so they uniformly praised the technical support. I received most
of my support via E-mail, with all replies returned promptly. I didn't have many
questions, though, since the program ran without a bug and the manual was very
thorough. Insider TA comes with a tutorial as well (it's always on the control
panel in front of you when you're using the program), which does a good job of
introducing you to the unique interface and the choices available.
SUMMARY
If you like volume analysis, you'll like Insider TA. It's a worthy buy just to experiment with some of the ideas in the program (Figure
7), not to mention the Box Analysis function can generate some very nice trading
signals.
Figure 7: GAME CENTRAL. Switches, arrows, nifty graphics, and lots of dials
and switches populate Insider TA's basic screen. Just one of the key features
is the animated (that's right, animated!) graphics.
All in all, Insider TA is a nifty value in volume-related technical analysis software.
John Sweeney is Technical Editor of STOCKS
& COMMODITIES Magazine.
Reprinted with permission from Technical Analysis of STOCKS & COMMODITIES
magazine. © 1996 Technical Analysis Inc., 4757 California Ave. SW, Seattle,
WA 98116, (800) 832-4642.
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