What is Previous Close
Previous close is a security's closing price on the preceding day of trading. Previous close can refer to the prior day's value of a stock, bond, commodity, futures or option contract, market index, or any other security.
BREAKING DOWN Previous Close
Previous close can be an important indicator for a variety of different technical patterns. It is one of two essential components in a candlestick day chart. It also may be used by investors and technical analysts to chart gap patterns which can show substantial changes from a previous close to new open.
A stock's previous close is an important value displayed on end of day communications. The previous close will be the value displayed from any financial news source after financial market trading has been halted for the day. A stock’s closing value is typically shown with its gain or loss for the day until the next opening value occurs. Most news outlets calculate price changes based on the difference from a security’s market open to the market close.
Some financial systems use a ticker tape style of communication which may provide several pieces of information about a stock including its current price, volume, and gain or loss. Many ticker tape communications will provide the gain or loss based on the difference in value from the previous day’s closing price and the current price. In general, an up or down arrow shows the stock’s current price trend. A significant price change can usually indicate major news about the company, such as an acquisition, change in management or positive earnings beat.
Technical traders also use candlestick patterns and follow price gaps for trading insight. A candlestick pattern is created from a security’s open and closing price. If a closing price is higher than the open a green candlestick is formed. If a security’s closing price is lower than the open then a red candlestick is formed. Traders follow the movement of candlestick patterns over time to distinguish trends. Traders may also closely follow the movement from one day to the next to identify a gap pattern.
Up gap and down gap patterns are two important patterns that a trader may use as an indicator. An up gap occurs when the opening price of a security is significantly higher than the closing price from the previous day. A down gap occurs when a security’s opening price is significantly lower than the previous day’s closing price. Significant gaps from the closing price to the opening price can be caused by company news or management releases. In some cases, an up gap or a down gap can also be an indication of a price trend.