Stock Price Trends
Stock price trends estimated using linear regression.
Summary
Key facts
- The primary trend is decreasing.
- The decline rate of the primary trend is 26.63% per annum.
- GSK price at the close of February 27, 2015 was $47.42 and was higher than the top border of the primary price channel by $2.74 (6.13%). This indicates a possible reversal in the primary trend direction.
- The secondary trend is increasing.
- The growth rate of the secondary trend is 131.19% per annum.
- GSK price at the close of February 27, 2015 was inside the secondary price channel.
- The direction of the secondary trend is opposite to the direction of the primary trend. This indicates a possible reversal in the direction of the primary trend.
Linear Regression Model
Model equation:
Yi = α + β × Xi + εi
Top border of price channel:
Exp(Yi) = Exp(a + b × Xi + 2 × s)
Bottom border of price channel:
Exp(Yi) = Exp(a + b × Xi – 2 × s)
where:
i - observation number
Yi - natural logarithm of GSK price
Xi - time index, 1 day interval
σ - standard deviation of εi
a - estimator of α
b - estimator of β
s - estimator of σ
Exp() - calculates the exponent of e
Primary Trend
Start date: February 11, 2014
End date: February 3, 2015
a = 5.2737
b = -0.0008
s = 0.0366
Annual growth rate:
Exp(365 × b) – 1
= Exp(365 × -0.0008) – 1
= -26.63%
Price channel spread:
Exp(4 × s) – 1
= Exp(4 × 0.0366) – 1
= 15.75%
February 11, 2014 calculations
Top border of price channel:
Exp(Y995)
= Exp(a + b × X995 + 2 × s)
= Exp(a + b × 1,443 + 2 × s)
= Exp(5.2737 + -0.0008 × 1,443 + 2 × 0.0366)
= Exp(4.1228)
= $61.73
Bottom border of price channel:
Exp(Y995)
= Exp(a + b × X995 – 2 × s)
= Exp(a + b × 1,443 – 2 × s)
= Exp(5.2737 + -0.0008 × 1,443 – 2 × 0.0366)
= Exp(3.9765)
= $53.33
February 3, 2015 calculations
Top border of price channel:
Exp(Y1,241)
= Exp(a + b × X1,241 + 2 × s)
= Exp(a + b × 1,800 + 2 × s)
= Exp(5.2737 + -0.0008 × 1,800 + 2 × 0.0366)
= Exp(3.8199)
= $45.60
Bottom border of price channel:
Exp(Y1,241)
= Exp(a + b × X1,241 – 2 × s)
= Exp(a + b × 1,800 – 2 × s)
= Exp(5.2737 + -0.0008 × 1,800 – 2 × 0.0366)
= Exp(3.6737)
= $39.40
Description
- The primary trend is decreasing.
- The decline rate of the primary trend is 26.63% per annum.
- GSK price at the close of February 27, 2015 was $47.42 and was higher than the top border of the primary price channel by $2.74 (6.13%). This indicates a possible reversal in the primary trend direction.
Secondary Trend
Start date: December 30, 2014
End date: February 27, 2015
a = -0.3169
b = 0.0023
s = 0.0136
Annual growth rate:
Exp(365 × b) – 1
= Exp(365 × 0.0023) – 1
= 131.19%
Price channel spread:
Exp(4 × s) – 1
= Exp(4 × 0.0136) – 1
= 5.59%
December 30, 2014 calculations
Top border of price channel:
Exp(Y1,218)
= Exp(a + b × X1,218 + 2 × s)
= Exp(a + b × 1,765 + 2 × s)
= Exp(-0.3169 + 0.0023 × 1,765 + 2 × 0.0136)
= Exp(3.7629)
= $43.07
Bottom border of price channel:
Exp(Y1,218)
= Exp(a + b × X1,218 – 2 × s)
= Exp(a + b × 1,765 – 2 × s)
= Exp(-0.3169 + 0.0023 × 1,765 – 2 × 0.0136)
= Exp(3.7085)
= $40.79
February 27, 2015 calculations
Top border of price channel:
Exp(Y1,258)
= Exp(a + b × X1,258 + 2 × s)
= Exp(a + b × 1,824 + 2 × s)
= Exp(-0.3169 + 0.0023 × 1,824 + 2 × 0.0136)
= Exp(3.8984)
= $49.32
Bottom border of price channel:
Exp(Y1,258)
= Exp(a + b × X1,258 – 2 × s)
= Exp(a + b × 1,824 – 2 × s)
= Exp(-0.3169 + 0.0023 × 1,824 – 2 × 0.0136)
= Exp(3.8440)
= $46.71
Description
- The secondary trend is increasing.
- The growth rate of the secondary trend is 131.19% per annum.
- GSK price at the close of February 27, 2015 was inside the secondary price channel.
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