Stochastic

The Stochastic is another indicator that helps us determine where a trend might be ending.

By definition, a Stochastic is an oscillator that measures overbought and oversold conditions in the market. The 2 lines are similar to the MACD lines in the sense that one line is faster than the other.As we said earlier, the Stochastic tells us when the market is overbought or oversold. The Stochastic is scaled from 0 to 100. 

Stochastic Fast

Stochastic Fast plots the location of the current price in relation to the range of a certain number of prior bars (dependent upon user-input, usually 14-periods). In general, stochastics are used to measure overbought and oversold conditions. Above 80 is generally considered overbought and below 20 is considered oversold. The inputs to Stochastic Fast are as follows:

• Fast %K: [(Close - Low) / (High - Low)] x 100
• Fast %D: Simple moving average of Fast K (usually 3-period moving average)

Stochastic Slow

Stochastic Slow is similar in calculation and interpretation to Stochastic Fast. The difference is listed below:

• Slow %K: Equal to Fast %D (i.e. 3-period moving average of Fast %K)
• Slow %D: A moving average (again, usually 3-period) of Slow %K

The Stochastic Slow is generally viewed as superior due to the smoothing effects of the moving averages which equates to less false buy and sell signals. A comparison of the two stochastics, fast and slow, is shown below in the chart

Full Stochastic Oscillator (Full STO)

The combination of the Slow Stochastic and the Fast Stochastic is called a Full Stochastic. It uses 3 parameters:

The uniqueness of Slow Stochastic is that it uses a "smoothing factor" for the initial %K line that is "n-period" SMA (n is the same number as the middle parameter) of the initial %K line

The Full Stochastic Oscillator is more advanced and more flexible than the Fast and Slow Stochastic and can even be used to generate them. For example, a (14, 1, 3) Full Stochastic is equivalent to a (14, 3) Fast Stochastic while a (12, 3, 2) Full Stochastic is identical to a (12, 2) Slow Stochastic.

Much as the Fast and Slow Stochastics, the number of periods used to create the initial %K line, is defined by the first parameter. %D is again the number of periods that is used to create the signal line.
Readings above 80 act as an overbought signal while readings below 20 act an oversold signal. However, even if the Stochastic Oscillator has reached 80 securities can continue to rise. Similarly, even after it has reached 20 it can continue to fall.

Stochastics Buy & Sell Signals

Stochastics Buy Signal

When the Stochastic is below the 20 oversold line and the %K line crosses over the %D line, buy.

Stochastics Sell Signal

When the Stochastic is above the 80 overbought line and the %K line crosses below the %D line, sell.
Stochastic Fast buy and sell signals are illustrated below in the chart

 Stochastic Slow is presented below in the chart of the contract. Notice how much smoother the %K and %D lines are and how many fewer false signals were given by the Stochastic Slow than were given by the Stochastic Fast indicator.

 In addition to giving clear buy and sell signals, the Stochastic technical analysis indicator is also helpful in detecting price divergences and confirming trend.

Stochastic Price Divergences

Stochastics can be used to confirm price trend. In the example below of the chart, the Stochastic indicator spent most of its time in the overbought area. When Stochastics get stuck in the overbought area, like at the very right of the chart, this is a sign of a strong bullish run. Signals to sellshort would be ignored; however, before the signal not to short was given, many losses unfortunately would have accrued from failed shorting attempts on the left half of the chart.

A powerful and more common occurence is Stochastic divergences. The chart below illustrates Stochastic divergences and confirmations:

Low #1 to Low #2

The Stochastic Slow confirmed the upward movement of gold futures prices by making a higher low.

High #1 to High #2

Gold futures rallied to make a higher high; however, the Stochastic Slow indicator failed to make a higher high, instead it made a lower high. This divergence coupled with a trendline break in the price of gold would be a strong warning to futures traders that the recent rally had probably ended and any long futures positions should be exited or at least scaled back.

Low #3 to Low #4

Gold prices continued its downward tumble, making a lower low at Low #4. On the other hand, the Stochastic Slow indicator was signaling a higher low. This bullish divergence would have warned traders to exit their shortsells, the price of gold had a strong potential of bottoming.

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ADX Average Directional Index

The Average Directional Movement Index (ADX) technical analysis indicator describes when a market is trending or not trending. When combined with the DMI+ plus and DMI- minus (see: DMI) the ADX can generate buy and sell signals.

However, the main purpose of the ADX is to determine whether a stock, future, or currency pair is trending or is in a trading range. Determining which mode a market is in is helpful because it can guide a trader to which other technical analysis indicators to use.

The chart contract below shows an excellent example of the ADX in action:

ADX Shows Trend Strength

The first concept to remember is that the direction that the ADX moves doesn't depend upon the direction of the underlying stock. All the ADX shows is the trend strength.

1. Strong upward trend of stock = Increasing ADX
2. Strong downward trend = Increasing ADX

As can be referenced from the chart of the E-mini Russell 2000 Index Futures contract above, when the e-mini future was rising in a strong upward trend, the ADX indicator was rising.

When the e-mini futures contract moved into a non-directional consolidation phase, the ADX decreased.

ADX is a Great Complement to Other Technical Indicators

The ADX is so popular because determining whether a stock, commodity, or currency market is trending or not trending can help a trader avoid the pitfalls of some indicators.

Moving Averages

Moving averages and their variants are effective during trending markets; however, during consolidation periods when prices go up and down, but in no direction, moving average indicators have a tendency to give numerous false buy and sell signals that add up to trading losses. During trending markets, use moving averages, trend-lines, and other trend following technical indicators.

Oscillators

Oscillators are extremely effective in non-trending markets. Buying low and selling high is accomplished quite readily with oscillators. Unfortunately, during trending markets, oscillators perform quite poorly, often selling short during a bull market run or buying during a bear market downtrend, adding up to large losses. For periods of non-trending, use oscillators like Stochastic Fast & Slow, RSI, or Williams %R and other range-bound indicators like Bollinger Bands or Moving Average Envelopes.

The importance of the 20-level and 40-level, along with more examples of the ADX in action,

Interpreting the ADX

It is important to re-emphasize that the direction of price doesn't affect the ADX; it is the strength of the stock, futures, or currency's trend that matters.

Below, we see the contract chart , but here the e-mini future is in a downtrend, a strong downtrend. Note that the ADX is rising even though the price of the contact is falling.

Interpreting the ADX

• Below 20: Non-trending market.
• Crosses above 20: Signal that a trend might be emerging; consider initiating buy or sell short in direction of prevailing stock, future, or currency price movement.
• Between 20 & 40: If ADX is increasing between 20 and 40, then it is further confirmation of emerging trend. Buy or shortsell in the direction of the current market direction. Avoid using oscillator technical indicators and use trend following indicators like moving averages.
• Above 40: Very strong trend.
• Crosses above 50: Extremely strong trend.
• Crosses above 70: "Power Trend"; very rare occurence

In his book, New Concepts in Technical Trading Concepts, Welles Wilder, Jr., the creator of the ADX also created the DMI+ and DMI- indicators to generate buy and sell signals specifically for the ADX technical analysis indicator. In fact the ADX is derived from the DMI+ and DMI- calculations (see: DMI).

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(DMI) Directional Movement Index

(DMI) Directional Movement Index

Part of the ADX indicator, the Directional Movement Index (DMI) consists of two lines, the DMI plus line (DMI+) and the DMI minus line (DMI-), which generate buy and sell signals.

The chart below shows an example of the DMI:

DMI Bullish Crossover Buy Signal

When the DMI+ crosses above the DMI-.

DMI Bearish Crossover Sell Signal

When the DMI- crosses below the DMI+.
Note: The DMI crossovers can generate many false signals, other indicators should be used for confirmation of the DMI crossovers.
The Average Directional Movement Index (ADX) is an important addition to the DMI+ and DMI- indicators. In fact, the ADX is calculated using both DMI lines.

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Parabolic SAR

The Parabolic Stop and Reverse (SAR) indicator combines price and time components to generate buy and sell signals. The Parabolic SAR is also effective as a tool to determine where to place stop loss orders.

The chart below contract is a good illustration showing buy and sell signals generated by the Parabolic Stop and Reverse (SAR) technical indicator:

Parabolic SAR Buy Signal

Buy when the price closes above the upper Parabolic SAR. When the Parabolic SAR changes from being above price to below price, then the stock, futures, or currency trader should "stop" and buy to cover their existing short sell and "reverse" direction and buy to go long.

Parabolic SAR Sell Signal

A sell signal is generated went the price closes below the lower Parabolic SAR. At the time that the Parabolic SAR changes from being below price to being above price, the trader should "stop" and sell to exit their existing long trade and "reverse" direction and sell to go short.

One of the best uses of the Parabolic SAR is in deterring where to place stop loss orders.

Parabolic SAR Stop Loss Placement

An effective use of the Parabolic SAR is determining where to place stop loss orders to protect profits or minimize losses. The chart below illustrates stop loss placement using the Parabolic SAR indicator:

The Parabolic SAR is an effective stop loss placement tool for two reasons: 

1. It acts as a trailing stop. Rather than putting in one stop loss below where a trader entered a long position or above where the trader entered a short position, using the Parabolic SAR as a trader's guide, the stop loss is gradually raised for a long position and lowered in a short position, effectively locking in any profits.
2. It acts as a time stop. Time stops are used by traders because they enter in buy or sell orders expecting a certain move to occur. If the expected move never occurs and the reason the trader initiated the trade is no longer relavent, then the trader should exit their trade. Similarly, the Parabolic SAR incorporates time into its calculation making sure a stock, future, or currency trade is working for the trader, if the trade is not moving in the desired direction, the Parabolic SAR will signal an exit.

In yet another effective technical indicator created by Welles Wilder and chronicled in his classic New Concepts in Technical Trading Systems, the Parabolic SAR gives easy to interpret buy and sell signals as well as creates an easy to follow methodology for entering stop loss orders.

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Williams %R

Williams %R

 INTRODUCTION:

Developed by Larry Williams, Williams %R is a momentum indicator that works much like the Stochastic Oscillator. It is especially popular for measuring overbought and oversold levels. The scale ranges from 0 to -100 with readings from 0 to -20 considered overbought, and readings from -80 to -100 considered oversold.

William %R, sometimes referred to as %R, shows the relationship of the close relative to the high-low range over a set period of time. The nearer the close is to the top of the range, the nearer to zero (higher) the indicator will be. The nearer the close is to the bottom of the range, the nearer to -100 (lower) the indicator will be. If the close equals the high of the high-low range, then the indicator will show 0 (the highest reading). If the close equals the low of the high-low range, then the result will be -100 (the lowest reading).

Calculation

%R = [(highest high over ? periods - close)/(highest high over ? periods - lowest low over ? periods)] * -100

Williams %R is an overbought and oversold technical indicatorthat can give easy to interpret buy and sell signals. Williams %R is very similar to the Stochastic Fast indicator (see: Stochastics) as the chart below will illustrate:

Like Stochastics, the Williams %R indicator gives easily interpreted buy and sell signals, as is demonstrated in the chart below.

Williams %R Buy Signal

When the Williams %R indicator is below the oversold line (20) and it rises to cross over the 20 line, then buy.

Williams %R Sell Signal

Sell when the Williams %R indicator is above the overbought line (80) and then falls below the 80 line.

In addition to giving clear buy and sell signals, the Williams %R indicator can help identify strong trends.

Williams %R and Trends

The Williams % R indicator is extremely useful and profitable during sideways, non-trending markets. However, during trends, the Williams % R indicator does not fare as well, leading to losses. Nevertheless, the Williams % R indicator does give tell tale signs of strong trends that can easily be identified by traders for profit. The following chart  illustrates Williams % R's ability to detect such trends:

As the chart illustrate, when the Williams % R indicator stays in the oversold area (below 20) and any bullish rally barely registers with the Williams %R (i.e. fails to go above 80), then the downtrend is strong and a trader should not go long the market.

Similarly, when the Williams %R indicator stays in the overbought area (above 80) and any attempt at a downturn fails to send the indicator into oversold territory (i.e. fails to go below 20), then the uptrend is strong and a trader should not go short.

The Williams %R is a versatile technical indicator used by many; the indicator gives easily intepreted buy and sell signals, and also informs traders whether or not a market is likely overbought, oversold, or trending strongly. The Stochastic indicator (see: Stochastics) would be a logical next step for investigation.

 Typically, Williams %R is calculated using 14 periods and can be used on intraday, daily, weekly or monthly data. The time frame and number of periods will likely vary according to desired sensitivity and the characteristics of the individual security.

It is important to remember that overbought does not necessarily imply time to sell and oversold does not necessarily imply time to buy. A security can be in a downtrend, become oversold and remain oversold as the price continues to trend lower. Once a security becomes overbought or oversold, traders should wait for a signal that a price reversal has occurred. One method might be to wait for Williams %R to cross above or below -50 for confirmation. Price reversal confirmation can also be accomplished by using other indicators or aspects of technical analysis in conjunction with Williams %R.

One method of using Williams %R might be to identify the underlying trend and then look for trading opportunities in the direction of the trend. In an uptrend, traders may look to oversold readings to establish long positions. In a downtrend, traders may look to overbought readings to establish short positions. 

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Average True Range (ATR)

 Introduction

Developed by J. Welles Wilder and introduced in his book, New Concepts in Technical Trading Systems (1978), the Average True Range (ATR) indicator measures a security's volatility. As such, the indicator does not provide an indication of price direction or duration, simply the degree of price movement or volatility.

As with most of his indicators, Wilder designed ATR with commodities and daily prices in mind. In 1978, commodities were frequently more volatile than stocks. They were (and still are) often subject to gaps and limit moves. (A limit move occurs when a commodity opens up or down its maximum allowed move and does not trade again until the next session. The resulting bar or candlestick would simply be a small dash.) In order to accurately reflect the volatility associated with commodities, Wilder sought to account for gaps, limit moves, and small high-low ranges in his calculations. A volatility formula based on only the high-low range would fail to capture the actual volatility created by the gap or limit move.

Wilder started with a concept called True Range (TR) which is defined as the greatest of the following:

•The current High less the current Low.
•The absolute value of the current High less the previous Close.
•The absolute value of the current Low less the previous Close.

If the current high-low range is large, chances are it will be used as the True Range. If the current high-low range is small, it is likely that one of the other two methods would be used to calculate the True Range. The last two possibilities usually arise when the previous close is greater than the current high (signaling a potential gap down or limit move) or the previous close is lower than the current low (signaling a potential gap up or limit move). To ensure positive numbers, absolute values were applied to differences.

The example above shows three potential situations when the TR would not be based on the current high/low range. Notice that all three examples have small high/low ranges and two examples show a significant gap.

1.A small high/low range formed after a gap up. The TR was found by calculating the absolute value of the difference between the current high and the previous close.

2.A small high/low range formed after a gap down. The TR was found by calculating the absolute value of the difference between the current low and the previous close.

3.Even though the current close is within the previous high/low range, the current high/low range is quite small. In fact, it is smaller than the absolute value of the difference between the current high and the previous close, which is used to value the TR.

Note: Because the ATR shows volatility as an absolute level, low price stocks will have lower ATR levels than high price stocks. For example, a $10 security would have a much lower ATR reading than a $200 stock. Because of this, ATR readings can be difficult to compare across a range of securities. Even for a single security, large price movements, such as a decline from 70 to 20, can make long-term ATR comparisons difficult.

Calculation
Typically, the Average True Range (ATR) is based on 14 periods and can be calculated on an intraday, daily, weekly or monthly basis. For this example, the ATR will be based on daily data. Because there must be a beginning, the first TR value in a series is simply the High minus the Low, and the first 14-day ATR is the average of the daily ATR values for the last 14 days. After that, Wilder sought to smooth the data set, by incorporating the previous period's ATR value. The second and subsequent 14-day ATR value would be calculated with the following steps:

1.Multiply the previous 14-day ATR by 13.
2.Add the most recent day's TR value.
3.Divide by 14.

Basic signals: 

 If today's high is above yesterday's high and today's low is below yesterday's low, then today's high-low price range is used as the true range (the first alternative above).

If yesterday's close is greater than today's high or is less than today's low, then it signals a gap or limit move, and one of the other alternatives apply to determine the true range to use in calculating the ATR. At the beginning, the first TR value is simply the high minus the low, and the first 14-day ATR is the average of the daily TR values for the last 14 days. After that, the data is smoothed by incorporating the previous period's ATR value.

Strong trending moves, whether up or down, often include large price ranges or large true ranges, especially at the beginning of a move. Consequently, ATR can be used to help determine the enthusiasm behind a move or provide reinforcement for acting on a breakout.

Pro/con: ATR provides a better gauge of a market's recent price range and volatility over a given period. However, for markets that trade continuously around the clock, a steady stream of prices may reduce the need for the ATR indicator. ATR also does not provide any guidance on price direction.

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Positive Volume Index | Negative Volume Index

Positive Volume Index

The Positive Volume Index was introduced by Norman Fosback and is often used in conjunction with Negative Volume Index to identify bull and bear markets.  Positive Volume Index highlights days when volume is up on the previous day. Negative Volume Index highlights days when volume is down.

 Trading Signals

Fosback maintains that there is a 67% probability of a bear market when Positive Volume Index is below its 1 year moving average. The probability drops to 21% when PVI is above the moving average.

• Positive Volume Index crossing to below its one year moving average confirms the approach of a bear market.

  Example

  Procter & Gamble with Positive Volume Index 9-day exponential moving average (fast MA) and 255-day exponential moving average (slow MA).
  
  
  
  1. Fast MA crosses to below the slow MA. Bear signal [-].
  2. Fast MA crosses back to above the slow MA. End of bear signal [+].
  Indicator smoothing (the fast MA) eliminates several whipsaws from the Positive Volume Index.

  Formula

• Take yesterday's Positive Volume Index
• If today's volume is greater than yesterday, add:
             { ( Close [today] - Close [yesterday] ) / Close [yesterday] } * PVI [yesterday]
• Otherwise, add zero.        

  

Negative Volume Index

Also The Negative Volume Index was introduced by Norman Fosback and is often used in conjunction with Positive Volume Index to identify bull markets. The two indicators are based on the assumption that the smart money dominates trading on quiet days and that the uninformed crowd dominates trading on active days.Negative Volume Index is based on days when volume is down from the previous day. Positive Volume Index is based on days when volume is up on the previous day.

 Trading Signals

Fosback maintains that there is a 95% probability of a bull market when Negative Volume Index is above its 1 year moving average. The probability drops to 50% when NVI is below the moving average.

• Negative Volume Index crossing to above its one year moving average confirms the approach of a bull market.

  Example

  Wal-Mart Stores Inc. plotted with Negative Volume Index, 9-day exponential moving average and 255 day exponential moving average (of NVI).
  
  
  
  Use the 9-day moving average crossing the 255-day MA to signal the start of a bull-trend: The Negative Volume Index itself has too many whipsaws.
• The 9-day moving average crosses to above the 255-day MA, indicating an up-trend [+].
• The trend is well on its way before the next signal [+].
• A whipsaw occurs during a strong down-trend. The signal [?] is incorrect.
• The fast MA crosses to above the slow MA [+] but the ensuing trend is not very strong.
• Another signal [+] but the rally is even weaker.

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Accumulation Distribution

Accumulation Distribution uses volume to confirm price trends or warn of weak movements that could result in a price reversal.

• Accumulation: Volume is considered to be accumulated when the day's close is higher than the previous day's closing price. Thus the term "accumulation day"
• Distribution: Volume is distributed when the day's close is lower than the previous day's closing price. Many traders use the term "distribution day"

Therefore, when a day is an accumulation day, the day's volume is added to the previous day's Accumulation Distribution Line. Similarly, when a day is a distribution day, the day's volume is subtracted from the previous day's Accumulation Distribution Line.

The main use of the Accumulation Distribution Line is to detect divergences between the price movement and volume movement. An example of the Accumulation Distribution Line is shown below in the chart.

Volume Interpretation

The basic interpretation of volume goes as follows:

• Increasing and decreasing prices are confirmed by increasing volume.
• Increasing and decreasing prices are not confirmed and warn of future trouble when volume is decreasing.

For more in-depth analysis of Volume (see: Volume).

High #1 to High #2

The Nasdaq 100 made an equal high (i.e. Double Top formation) at High #2; however, the Accumulation Distribution Line failed to make an equal high, in fact it made a lower high. On average, less volume was transacted on the move higher at High #2 than occured on the first move higher at High #1; thus, this could be interpreted as there being less strength and conviction behind the rally in the Nasdaq the second move higher. This failure of the Accumulation Distribution Line signaled a strong bearish divergence.

High #3 to High #4

Again, the Accumulation Distribution line made a lower high, even though the Nasdaq 100 this time made a higher high. This bearish divergence warned that the second move to make a higher high in price lacked conviction.

Low #1 to Low #2

The bearish divergence from Low #1 to Low #2 confirmed the later bearish divergence of High #3 to High #4. On average, more volume was occuring on down days than up days, even while the Nasdaq 100 was making higher highs and higher lows, which usually is considered a sign of strength.

In summary, the Accumulation Distribution Line is a very effective tool to confirm price action and show warnings of potential price reversals. It is important to incorporate volume into price analysis, and the Accumulation Distribution Line is one of many indicators to do just this. Other indicators that include price and volume analysis and could be considered more accurate than the Accumulation Distribution Line include the Chaikin Oscillator (see: Chaikin Oscillator), Money Flow Index (see: Money Flow Index), and Price Volume Trend indicator (see: Price Volume Trend).

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Price Volume Trend

Price Volume Trend combines percentage price change and volume to confirm the strength of price trends or through divergences, warn of weak price moves. Unlike other price-volume indicators, the Price Volume Trend takes into consideration the percentage increase or decrease in price, rather than just simply adding or subtracting volume based on whether the current price is higher than the previous day's price. How the formula is calculated is presented below:

1. On an up day, the volume is multiplied by the percentage price increase between the current close and the previous time-period's close. This value is then added to the previous day's Price Volume Trend value.
2. On a down day, the volume is multiplied by the percentage price decrease between the current close and the previous time-period's close. This value is then added to the previous day's Price Volume Trend value.

The Price Volume Trend is helpful in seeing divergences; examples of these divergences are shown below in the chart.

The Price Volume Trend indicator is usually interpreted as follows:

• Increasing price accompanied by an increasing Price Volume Trend value, confirms the price trend upward.
• Decreasing price accompanied by a decreasing Price Volume Trend value, confirms the price trend downward.
• Increasing price accompanied by a decreasing or neutral Price Volume Trend value is a divergence and is indicating that the price movement upward is weak and lacking conviction.
• Decreasing price accompanied by a increasing or neutral Price Volume Trend value is a divergence and is indicating that the price movement downward is weak and lacking conviction.

High #1 to High #2

AT&T stock made lower highs, but the Price Volume Trend indicator made higher highs. This bullish divergence warned that bulls might be taking control of the stock and shorting AT&T would not be advisable.

Since the Price Volume Trend indicator multiplies positive volume when prices close higher than the previous day's close, the Price Volume Trend indicator could be interpreted as meaning that more volume flowed into High #2 than flowed into High #1. More volume interest by buyers at High #2 signaled that the price move higher had significant strength behind it and it probably was going to continue.

Low #1 to Low #2

The stock price made higher lows, generally considered a bullish signal; the Price Volume Trend indicator confirmed this move higher when it made higher highs as well.

Price Volume Trend is a valuable technical analysis tool that combines both price and volume to confirm price action or warn of potential weakness or lack of conviction by buyers and sellers. Other similar indicators that should be investigated further are the Chaikin Oscillator (see: Chaikin Oscillator) and the Money Flow Index (see: Money Flow Index).

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Chaikin Oscillator

The Chaikin Oscillator or Volume Accumulation Oscillator consists of the difference between two exponential moving averages (usually 3 and 10-day) of the Accumulation Distribution Line indicator and is used to confirm price movement or divergences in price movement. The Chaikin Oscillator is more accurate than the On Balance Volume indicator (see: On Balance Volume).

• On Balance Volume: adds all volume for the day if the close is positive, even if the stock closed only a penny higher or subtracts all volume for the day if the stock closes lower.
• Chaikin Oscillator: factors in the closing price in relation to the highs, lows, and average price and determines the appropriate ratio of volume to be attributed to the day.

The main purpose of the Chaikin Oscillator is to confirm price trends and warn of impending price reversals. The chart below of the chart illustrates these confirmation signals and divergence signals:

High #1 to High #2

The Nasdaq 100 ETF QQQQ made higher highs, usually a bullish sign. However, the Chaikin Oscillator failed to mirror the QQQQ's advance higher and ended up making a lower low. This bearish divergence forewarned of the impending price reversal.

High #2 to High #3

The QQQQ's made a significantly lower high. The Chaikin Oscillator confirmed the QQQQ's downtrend by making a lower high as well.

Low #1 to Low #2

The Nasdaq 100 made significant lower lows, yet the Chaikin Oscillator made higher lows. This bullish divergence signaled that the previous downtrend may have ended.

The Chaikin Oscillator is a helpful volume based technical indicator that helps confirm the current price action or foreshadow future price reversals. Other technical indicators similar to the Chaikin Oscillator is the On Balance Volume indicator (see: On Balance Volume) and the Money Flow Index (see: Money Flow Index).

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