Top 10 Countdown Of Reasons For Using Stock Metadata – #3 Of 10
February 9, 2010 by JR
Filed under Day Trading
Reason 3 for using stock metadata is having accurate statistics that can help you anticipate a higher or lower price when the market opens for trading.
Using stock metadata described by reason 3 can help to make money by answering this question:
“What are the chances today’s opening price for this stock being higher or lower than the previous day’s closing price?”
Here’s how metadata answers the question. Start off by looking at the information available from the Daily Historical Metadata Detail report.
More specifically, this would be the two columns of information below the headings Open vs Prev Close, one black (closed up) and the other red (closed down).
Calculations that don’t appear in the actual report were added at the bottom of each of these columns in order to better illustrate the logic of reason 3. These calculations count the number of entries in each of the columns and these results are also expressed as a percentage of the combined total.
In this article, we’ll look at using stock metadata from two sources, the
Daily Historical Metadata Detail report
Go to the author’s bio at the end of this article for the report description and layout
Click Here to see this report for the Ford Motor Company
Daily Historical Metadata Summary report
Go to the author’s bio at the end of this article for the report description and layout
Click Here to see this report for the Ford Motor Company
These sample reports for the Ford Motor Company conatin all of the metadata for the period starting from 10/1/2008 to and including 11/24/2009. Prices shown have been altered slightly so as to maintain the focus on the metadata being presented.
As shown above in figure 3a above, the total number of cells in each of these columns containing any numeric value adds up to 188 and 91 respectively. Now, we divide each of these totals by the “Count =” value (291) which is found in the top left corner of the report and convert the results to display as a percentage.
A method used for validating this information is to do a comparison to the section showing the overall Open vs Prev Close Gap metadata (figure 3b) which is found within the Daily Historical Metadata Summary report for the Ford Motor company.
The number of occurrences that saw no change between the Open price and previous Close price is 11. If this value is subtracted from the total count of occurrences (199) that opened higher compared to the previous close, the result of 188 is exactly the same as the value appearing in figure 3a.
So as illustrated in figure 3a of reason 3, the next day always opened up higher 64.6% of the time and also opened up lower 31.3% of the time. That leaves 4.1% of the time where there was no change in price when comparing the previous day’s closing price to the current day’s opening price for the Ford shares.
Therefore in the case of shares of the Ford Company, the odds are more than 2 to 1 in favor of the stock opening higher the next day. This is the statistical expectation of what can happen on the 1st day after either the stock closes at a higher or lower price.
And if you analyze the information a bit further using stock metadata shown in figure 3a and look at the 2nd day, you come across more interesting statistics. You’ll discover that of those 188 days that opened up higher from the previous day’s close, on the 2nd day when the stock opened, there were
114 occurrences when the price was even higher
68 occurrences when it opened lower, and
5 occurrences when it opened at the same price compared to the previous day’s close
The overall total of which is one off 188 because when the last row has data, it has nothing to compare the data to. And that’s also the reason why the overall total is 290 as shown in figure 3b.
Referring back to figure 3a, then for the 91 days that opened at a lower price from the previous day’s close, there were
65 occurrences when the price opened higher on the 2nd day
22 occurrences when the price opened lower, and
4 occurrences that saw no change
All this to say, the odds seem better to anticipate the price of Ford shares to open higher regardless whether they closed up or down for the previous days.
And in order to further confirm how the stock will open, it is strongly recommended to also refer to a pre-market indicator. CNNmoney.com is a site offering pre-market information. Go there before the market opens to get idea where the market is heading at the start of the trading day.
Now let’s continue by examining the #4 reason for using stock metadata:
Getting statistics to help anticipate a higher or lower price at market close based on the closing price of the previous day.
The link to this next reason is included in the author’s biography that follows.
Click Here to go to Reason #5
Click Here to access all Report Definitions and Layouts
Stan Pokutylowicz is a Senior Information Technology Specialist and is currently the System Architect and site-design specialist for Stock-Market-Keywords.com, a site containing popular search keywords on the stock market.
This site also features a different publicly-traded company each day of the week, Monday through Friday. As part of that offer is a series of 5 metadata reports containing statistical and historical information about the stock’s price over a period of approximately 12 months.
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Tags: day traders, options, futures, forex, stocks
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