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 21.02% per annum.
- CVS price at the close of May 20, 2024 was $57.40 and was inside the primary price channel.
- The secondary trend is increasing.
- The growth rate of the secondary trend is 8.92% per annum.
- CVS price at the close of May 20, 2024 was lower than the bottom border of the secondary price channel by $10.49 (15.46%). This indicates a possible reversal in the secondary trend direction.
- 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 CVS 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: December 9, 2021
End date: December 5, 2023
a = 5.2508
b = -0.0006
s = 0.0672
Annual growth rate:
Exp(365 × b) – 1
= Exp(365 × -0.0006) – 1
= -21.02%
Price channel spread:
Exp(4 × s) – 1
= Exp(4 × 0.0672) – 1
= 30.83%
December 9, 2021 calculations
Top border of price channel:
Exp(Y645)
= Exp(a + b × X645 + 2 × s)
= Exp(a + b × 933 + 2 × s)
= Exp(5.2508 + -0.0006 × 933 + 2 × 0.0672)
= Exp(4.7820)
= $119.34
Bottom border of price channel:
Exp(Y645)
= Exp(a + b × X645 – 2 × s)
= Exp(a + b × 933 – 2 × s)
= Exp(5.2508 + -0.0006 × 933 – 2 × 0.0672)
= Exp(4.5133)
= $91.22
December 5, 2023 calculations
Top border of price channel:
Exp(Y1,144)
= Exp(a + b × X1,144 + 2 × s)
= Exp(a + b × 1,659 + 2 × s)
= Exp(5.2508 + -0.0006 × 1,659 + 2 × 0.0672)
= Exp(4.3126)
= $74.64
Bottom border of price channel:
Exp(Y1,144)
= Exp(a + b × X1,144 – 2 × s)
= Exp(a + b × 1,659 – 2 × s)
= Exp(5.2508 + -0.0006 × 1,659 – 2 × 0.0672)
= Exp(4.0439)
= $57.05
Description
- The primary trend is decreasing.
- The decline rate of the primary trend is 21.02% per annum.
- CVS price at the close of May 20, 2024 was $57.40 and was inside the primary price channel.
Secondary Trend
Start date: March 9, 2023
End date: April 10, 2024
a = 3.8870
b = 0.0002
s = 0.0482
Annual growth rate:
Exp(365 × b) – 1
= Exp(365 × 0.0002) – 1
= 8.92%
Price channel spread:
Exp(4 × s) – 1
= Exp(4 × 0.0482) – 1
= 21.28%
March 9, 2023 calculations
Top border of price channel:
Exp(Y957)
= Exp(a + b × X957 + 2 × s)
= Exp(a + b × 1,388 + 2 × s)
= Exp(3.8870 + 0.0002 × 1,388 + 2 × 0.0482)
= Exp(4.3083)
= $74.32
Bottom border of price channel:
Exp(Y957)
= Exp(a + b × X957 – 2 × s)
= Exp(a + b × 1,388 – 2 × s)
= Exp(3.8870 + 0.0002 × 1,388 – 2 × 0.0482)
= Exp(4.1154)
= $61.28
April 10, 2024 calculations
Top border of price channel:
Exp(Y1,230)
= Exp(a + b × X1,230 + 2 × s)
= Exp(a + b × 1,786 + 2 × s)
= Exp(3.8870 + 0.0002 × 1,786 + 2 × 0.0482)
= Exp(4.4015)
= $81.57
Bottom border of price channel:
Exp(Y1,230)
= Exp(a + b × X1,230 – 2 × s)
= Exp(a + b × 1,786 – 2 × s)
= Exp(3.8870 + 0.0002 × 1,786 – 2 × 0.0482)
= Exp(4.2086)
= $67.26
Description
- The secondary trend is increasing.
- The growth rate of the secondary trend is 8.92% per annum.
- CVS price at the close of May 20, 2024 was lower than the bottom border of the secondary price channel by $10.49 (15.46%). This indicates a possible reversal in the secondary trend direction.
- Discover a new approach to trend analysis.
- Check the power of mathematical statistics.
- Price channels have never been so accurately estimated.
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