Tuesday, January 28, 2003 3:51:00 PM
Looking through the long list of technical indicators available at StockCharts.com I find that I'm still satisfied with the Williams%R and its correlation with AIM's buying and selling.
Another one that seems to fit fairly well as a confirmation type device is the Chaikin Money Flow (CMF) indicator. I reset the default setting (20) to 14 to match the default value of W%R, then set the chart for 3 years of weekly data. It then shows accumulation and dispersal nicely. What pleased my eye was that when the market seemed to be accumulating, AIM was in the Sell mode. When the market was selling off, AIM was in there buying. This seemed to fit well with my motto!
Now, it's not quite as uniform in confirmation as is W%R, but was good enough that I thought I'd bring it up as a possible point of study for those who might be interested. Here's the way it's described by StockCharts.com:
"Chaikin Money Flow (CMF)
Developed by Marc Chaikin, the Chaikin Money Flow oscillator is based on the level of the close relative to the high/low range. Accumulation or buying pressure is present when prices close in the upper half of the day's range on increased volume. Distribution or selling pressure is evident when prices close in the lower half of the day's range with increased volume. Because the change from close to close is not considered in the calculation, a security can close lower (higher) and still exhibit signs of accumulation (distribution).
The Accumulation Distribution Line, also developed by Chaikin, is based on this same methodology. Whereas the Accumulation Distribution Line provides a cumulative reading, CMF is based on a set look back period. For daily charts, this is typically a 21-day smoothed average that fluctuates between +1 and -1. Readings above +.10 (+10%) indicate accumulation/buying pressure and readings below -.10 (-10%) indicate distribution/selling pressure.
This indicator is best used in conjunction with traditional technical analysis and other indicators. Divergences can be used too, but it is usually best to wait for a cross of the zero line for confirmation. The number of periods for the indicator can be varied according to the sensitivity sought and the time horizon of individual investor/trader."
Here's an example:
http://stockcharts.com/def/servlet/SC.web?c=QQQ,uu[h,a]wahlyyay[df][pb26!e30][vc60][iLk14!Lc14]&...
Best regards, Tom
Another one that seems to fit fairly well as a confirmation type device is the Chaikin Money Flow (CMF) indicator. I reset the default setting (20) to 14 to match the default value of W%R, then set the chart for 3 years of weekly data. It then shows accumulation and dispersal nicely. What pleased my eye was that when the market seemed to be accumulating, AIM was in the Sell mode. When the market was selling off, AIM was in there buying. This seemed to fit well with my motto!
Now, it's not quite as uniform in confirmation as is W%R, but was good enough that I thought I'd bring it up as a possible point of study for those who might be interested. Here's the way it's described by StockCharts.com:
"Chaikin Money Flow (CMF)
Developed by Marc Chaikin, the Chaikin Money Flow oscillator is based on the level of the close relative to the high/low range. Accumulation or buying pressure is present when prices close in the upper half of the day's range on increased volume. Distribution or selling pressure is evident when prices close in the lower half of the day's range with increased volume. Because the change from close to close is not considered in the calculation, a security can close lower (higher) and still exhibit signs of accumulation (distribution).
The Accumulation Distribution Line, also developed by Chaikin, is based on this same methodology. Whereas the Accumulation Distribution Line provides a cumulative reading, CMF is based on a set look back period. For daily charts, this is typically a 21-day smoothed average that fluctuates between +1 and -1. Readings above +.10 (+10%) indicate accumulation/buying pressure and readings below -.10 (-10%) indicate distribution/selling pressure.
This indicator is best used in conjunction with traditional technical analysis and other indicators. Divergences can be used too, but it is usually best to wait for a cross of the zero line for confirmation. The number of periods for the indicator can be varied according to the sensitivity sought and the time horizon of individual investor/trader."
Here's an example:
http://stockcharts.com/def/servlet/SC.web?c=QQQ,uu[h,a]wahlyyay[df][pb26!e30][vc60][iLk14!Lc14]&...
Best regards, Tom
Port Washington, WI 53074
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