Weekly vs. Daily charts

kidchicago

I am trying to figure out the difference between a weekly and daily chart. I understand that a daily chart shows the daily values for a measure - in this case, I am looking at the RSI for the S&P 500. But what changes when you select a "weekly" chart? If I look at the RSI for July 7, 2014 on a daily chart, it is different than the RSI for July 7, 2014 on a weekly chart. What is explains the difference?

Thank you!

Kevo

Charts are based on periods and timeframes. Different values of these two produce different charts. You have to have a thorough understanding of these things so that you do not get confused.

On a daily chart, the period is one day. On a weekly chart, the period is one week.

To determine one period on a weekly chart, it goes something like this: The opening on Monday morning and the close Friday afternoon is the open and close for one period on the weekly chart. The highest high and lowest low during the week represents the one high and one low for the one period on the weekly chart.

Can someone verify that this is correct? Hope this helps.

kidchicago? Kids in chicago probably need to spend a lot of time figuring this out.

markd

I would just add to Kevo's explanation, that the RSI indicator, like all indicators is based on a mathematical formula. The number that comes out depends on the data that went in. So for instance, RSI(14) on the daily chart uses the data from the last 14 days of trading - the last 14 end of day closing prices. On the weekly chart, RSI(14) uses the last 14 weeks of trading - meaning just the last close of the week (usually Friday, unless it's a holiday) for the last 14 weeks. These two sets of numbers going in to the RSI calculation will not be the same (except for the two or three daily closes that are also end of week closes), so the number coming out will not be the same.

kidchicago

Markd and Kevo, thank you! Markd, if you're right that the daily chart uses the last 14 days, and the weekly chart uses the last 14 WEEKS, that would obviously explain the different data points. But that is not how Stockcharts staff have explained it to me. They have said that for the weekly RSI chart, they use the different data points Kevo discussed, but that they don't average those data points. So what I don't understand is how all that data (Monday's open, highest high for the week, lowest low for the week, Friday close) are combined to produce a weekly RSI figure.

markd

Here is the Chart School link on RSI: https://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:relative_strength_index_rsi

As you can see, it refers to closes only.

To construct a single BAR on the weekly chart, you need the data points Kevo describes. But to construct the INDICATOR value, you would use JUST the close from each week.

Indicators vary on the data they use, depending on what it's inventor thought was relevant. Probably the majority are based on the close alone. But others use the high and low and sometimes the open and even volume as well.

Hope that helps.

Sharptraders

One week is not the open on Monday to the close on Friday...It is the close on Friday to the close the next Friday.

Kevo

WOW Sharptraders! I did not know that. Thanks!

Thanks markd for filling the gaps on RSI, which I left out.

markd

Just to clarify, for the purposes of indicators, and maybe line charts, a week can go from Fri close to Fri close. But for OHLC charts, the week's bar is plotted with the Mon open and the Fri close (plus the highest daily high and lowest daily low for the week).

You can see this on a chart for EA (check "full quote" on the chart workbench to see the open, high, low and last prices). The Friday daily close on 7/11 is 35.97, and so is the close for the weekly bar beginning 7/7. The Monday daily open on 7/14 is 36.35, as is the open for the weekly bar dated 7/14.

Kevo

It's markd to the rescue! Thanks markd for clearing the confusion.

Lets look a little closer at what Sharptraders is saying and why his statement would be incorrect.

Sharptraders says that one period on a weekly chart is from Friday's close to next Friday's close. This means that for every Friday, the closing price is identical to the opening price for the next period. In other words, the open for every period is the same as the close for the previous period. This would mean that weekly charts could never gap up or gap down.

If you look at weekly charts they do gap up and gap down! This means that the open for a period is not the same as the close for the previous period. Therefore, the open is not Friday's close.

BobV

Does pre and after hours trading show up in the weekly charts?

markd

Hi BobV, you would have to contact support to be sure, but it appears weekly data is derived from daily data, so I would guess pre and after hours trading is not included.