Indicator - Chande Momentum Oscillator
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Calculation Chande Momentum Oscillator
Pos = pos positive variation, pos=0 if variation is negative
Neg = neg negative variation, neg=0 if variation is positive.
Variation=pos-neg
We calculate Mpos and Mneg the moving average of p periods of pos and neg\nChande Momentum Oscillator = (MPos - MNeg) / (MPos + MNeg) * 100
Interpretation Chande Momentum Oscillator
This indicator is similar to the RSI. It oscillates between -100 and 100.
The level above +50 is an overbought zone and the level below -50 is an oversold zone.
The indicator can be smoothed with a moving average. Like with an RSI, its possible to calculate 2 moving averages that can indicate bullish and bearish signals when they cross.
Support and resistance lines can also be drawn on this indicator, and divergences can be studied.
A bullish divergence occurs when the price makes new lows while the indicator fails to make new lows.
A bearish divergence occurs when the stock price makes new highs while the indicator fails to make new highs.
