The fourth and final piece of data used to build a candlestick is a security's closing price. The closing price is the final price that's traded on a security during the day. These are the closing numbers that appear in the stock tables in newspapers, and the prices that investment professionals use to monitor their day-to-day performance. As with the other data used in creating a candlestick, closing prices are getting tougher and tougher to pin down.
Recording a closing price on a candlestick
Depending on the performance of a security, its closing price may appear in one of two places on a candlestick:
1 If the security had a bullish performance on a given day, the candle part of the candlestick is hollow (white). In that case, the closing price is represented by the top of the candle.
1 If the security performed bearishly, the candle is filled in (black), and its bottom marks the closing price for the day.
Just like the opening, high, and low prices (see previous sections), the closing price can be a real challenge to pin down because of the presence of electronic trading networks. Also, stocks and futures stay open for some time after their official exchanges close, so pinpointing what the market believes the true value for a stock or futures contract is at the end of the day is actually really difficult.
Although trading continues beyond the primary market's hours, stocks do generally trade for an hour or so after the exchanges close. Usually the trading in stocks after 4 p.m. EST on the electronic trading networks is pretty light in volume, but on days with significant earnings announcements or other news, several million shares of a stock may trade after the close.
One example of this after-close trade is what's referred to as earnings season. This time period is when many companies report their quarterly financial results to the financial and investing community. During a recent earnings season, both Microsoft (MSFT) and Google (GOOG) reported their earnings. Both stocks traded many millions of shares after the 4 p.m. official close of the NASDAQ, the primary trading market for both. With such a high volume of trading, this price action is significant enough to be included in charts.
For the earnings season in question, the investment community ("the street") wasn't terribly impressed with either company's results, and the stocks traded off pretty significantly as a result. Microsoft's official closing share price at 4 p.m. EST was 31.51, but in the "after hours" the stock traded down to 30.90, which is a nearly 2 percent drop from the closing price at 4 p.m. and 0.02 percent below the official low for the day of 30.93 per share.
The difference in Google's stock was even greater. The official 4 p.m. close was 548.59 a share, but after checking, the post market trading revealed a final price of 508.70 a share. That's more than 7 percent lower than the 4 p.m. close! It was also quite a bit lower than even the official low of the day, which was 542.24 a share.
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