Linear Regression Intercept

What Is the Linear Regression Intercept (LR-I)?

The Linear Regression Intercept (LR-I) is similar to the Linear Regression Forecast (LRF) in that it's based on the linear regression technique. The overlay can be used to identify underlying trends and when prices are overextended to the upside and downside.

The LR-I is a moving linear regression that plots the y-axis intercept for the derived trendline at each price point. Since the intercept is the origination point of the regression, the LR-I appears to be an offset moving average.

How To Chart the LR-I Using StockChartsACP

Once you’ve logged in to your StockCharts account, bring up the StockChartsACP Workbench. From Chart Settings, select Linear Regression Intercept from the Standard Indicators list.

How to add the LR-I overlay to StockChartsACP

1— Enter the symbol for the stock, index, or exchange-traded fund you want to analyze.

2— From Chart Settings, scroll down the list of Standard Indicators.

3— Select Linear Regression Intercept.

To change the color, style, or other overlay parameter settings for LR-I, select the settings icon next to the overlay and choose your parameters.

Periods. The default setting is 14, but you can change it to any number of bars you wish to use to calculate LR-I.

Calculated From. There are various choices here—solid, solid (thin), solid (thick), dashed, etc. Take your pick. Select the value you want to use for calculations. This can be the open, high, low, close, (H + L)/2, (H + L + C)/3, (H + L + 2C)/4, (O + H + L + C)/4;

Line Style. You have a few choices here—solid, solid (thin), solid (thick), dashed, etc. Take your pick.

Opacity. Use the slider to select the transparency of LR-I.

Colors. You can choose the color for LR-I that you prefer to view on your chart.

Add Overlays. Sometimes, additional overlays can help confirm trend direction. This dropdown menu offers several overlays to choose from.

The chart below shows a StockChartsACP chart with the LR-I (blue line) and LRF (red line) overlays.

Combining Linear Regression Intercept and Linear Regression Forecast can help identify bullish and bearish trends.

The LRF shows trend direction earlier than LR-I, but when LRF crosses above LR-I, it's a stronger confirmation of the change in trend direction. You can use the LR-I and LRF overlays in any time frame. Short-term traders find them especially useful in intraday charts.