EnviroTechnologies International Inc. (ETII)

[punk153]

The Accumulation/Distribution graph shows the trend of a given time span (Close-Open) compared to the range of that time span (High-Low) multiplied by the significance of the time span (volume). The time span would be given in the chart as 15-minute, 1-hour, 1-day and so on. Significance (volume) would dictate how important the Trend vs. Range is at a given time span. It in essence multiplies this ratio to give it a smaller or higher net worth to the overall trend of the Acc/Dist graph.

A/D = {(Close – Open) / (High - Low)} x Volume

A/D= {(Trend)/(Range)} x Significance

Bearish example:
{(3 – 10) / (10 – 2)} x 1,000 = -875

If the total volume were 10,000 instead, then the significance or the downtrend in the actual graph would be multiplied by 10 and would result in -8750 towards the graph instead.

A low volume means that the end result of the A/D equation is less significant towards the A/D graph. Any person using technical analysis should understand the significance of volume in either an uptrend or a downtrend and how that volume can give a trend 'importance'.

Basically, this equation gives you the ability to see a trend on the overall bullishness or bearshness of a stock with the volume priced in.

Low volume doesn't give the A/D graph the ability to rise or fall as drastically and gives you a sense that the recent movement in the A/D isn’t significant.

On the other hand, if the A/D is heading higher, it gives you the ability to note (by the varying degree of movement) the significance that a trend in the pps has in relation to the A/D graph. A rising A/D graph with falling pps would in essence tell you that the stock has had minimal shares being exchanged between hands to cause the pps decline. It would also tell you that the stock is likely to trade very thinly to the beginning of the stocks A/D graph's past peak if a rally were to begin in the pps since there must have been significant volume as the stock price was rising (shown by the A/D graph's incline significance)

*This is hard to expain without chart examples. Hopefully my explanation clears up some of the confusion.

http://www.chart-formations.com/indicators/accumulation-distribution.aspx?cat=market-strength

IMO