Ask Colin

If we adjust historical data for new issues etc, won

You are correct that adjustments affect support and resistance levels. In the example of the Qantas special dividend (actually a capital return), where the resistance level price being adjusted was not too far different to the price on the day the adjustment was generated, the adjustment was not great - $3.84 Vs $3.88. Support and resistance levels are not exact, so a 1% difference is not significant. However, for prices much further away from the price on the day the adjustment was generated, the error becomes greater. You then have to make a judgement about how well the market will adjust the prices. Remember that everyone does not use charts. A fundamental investor will do the correct calculation to establish their adjusted cost. If you think support and resistance levels are critical and there have been this kind of adjustment, it may pay to make the correct calculation just in case. Life was not meant to be easy...

By the way, it is easy to do this with Insight Trader, because the system always keeps the unadjusted data file and well as the adjusted one. So it is always possible to do as I suggest and check the calculation if you need to. With Metastock, you have to first try to undo all the adjustments in order to get to the original price. This is one of the things I do not like about MetaStock.



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