Stock prices change regularly. Minor increases or decreases in a stock price could be random, or can reflect wider market considerations instead of the company's performance. But if the stock price quickly reaches an unexpected new level, this may reflect a more significant change in how investors see the company. This change can help you predict further price acceleration. Acceleration bands are threshold values that indicate significant change.
Step 1
Identify the highest and lowest stock price during a reference period. For example, identify the stock's highest and lowest level during the past 20 days.
Step 2
Find the average of these values. For example, if the stock reached a high of $591 and a low of $563, add them together and divide the result by 2 to get an average of $577.
Step 3
Divide the difference between the high and low values by their average. Continuing the example, divide $28 by $577 to get 0.0659.
Step 4
Multiply this ratio by 2 and add 1. Continuing the example, multiply 0.0659 by 2 and add 1 to get 1.132.
Step 5
Multiply this factor by the stock's upper and lower values to find the upper and lower acceleration bands. Continuing the example, multiply $591 and $563 by 1.132 to get $669 and $637 as the stock's acceleration bands.
