Drone Services USA Inc. (DSUS)

[Cassandra]

The accumulation distribution line (ADL) is meaningless and very misleading on stocks in which the closing trades are usually paint jobs at the HOD. This is especially true for a stocks in the lowest $000's with high volume.

For three weeks PVEC was stuck at $.0001-$.0003 with almost all of the shares traded at $.0002. Even though the VWAP was $.0002 every day with selling far outpacing buying (until 2/6 and 2/7), the close was painted with a tiny trade at $.0003 almost every day. That's why the line goes up steeply. It was manipulated.

I have seen stocks with massive dilution and multiple year downtrends in PPS that show accumulation constantly rising over the entire time because of EOD paint jobs.

If you review how the line is calculated, you will understand how it can be manipulated by making sure the stock's closing trade is as high as possible, especially if it is at the HOD:

Accumulation Distribution Line

Introduction

Developed by Marc Chaikin, the Accumulation Distribution Line is a volume-based indicator designed to measure the cumulative flow of money into and out of a security. Chaikin originally referred to the indicator as the Cumulative Money Flow Line. As with cumulative indicators, the Accumulation Distribution Line is a running total of each period's Money Flow Volume. First, a multiplier is calculated based on the relationship of the close to the high-low range. Second, the Money Flow Multiplier is multiplied by the period's volume to come up with a Money Flow Volume. A running total of the Money Flow Volume forms the Accumulation Distribution Line. Chartists can use this indicator to affirm a security's underlying trend or anticipate reversals when the indicator diverges from the security price.

Calculation

There are three steps to calculating the Accumulation Distribution Line (ADL). First, calculate the Money Flow Multiplier. Second, multiply this value by volume to find the Money Flow Volume. Third, create a running total of Money Flow Volume to form the Accumulation Distribution Line (ADL).

1. Money Flow Multiplier = [(Close - Low) - (High - Close)] /(High - Low)

2. Money Flow Volume = Money Flow Multiplier x Volume for the Period

3. ADL = Previous ADL + Current Period's Money Flow Volume

The Money Flow Multiplier fluctuates between +1 and -1. As such, it holds the key to the Money Flow Volume and the Accumulation Distribution Line. The multiplier is positive when the close is in the upper half of the high-low range and negative when in the lower half. This makes perfect sense. Buying pressure is stronger than selling pressure when prices close in the upper half of the period's range (and visa versa). The Accumulation Distribution Line rises when the multiplier is positive and falls when the multiplier is negative.

http://stockcharts.com/school/doku.php?st=accumulation&id=chart_school:technical_indicators:accumulation_distrib