Chart Indicators

Absolute Breadth Index: Developed by Norman Fosback, the ABI is equal to the absolute value of the difference between the advancing issues and the declining issues. It shows how much activity and volatility is taking place on the New York Stock Exchange while totally ignoring the price direction.

Absolute Price Oscillator (APO): An indicator based on the difference between two exponential moving averages, and is expressed in absolute terms. Also known as the MACD indicator, the APO is calculated by subtracting the longer EMA from the shorter EMA. See ChartSchool article on Price Oscillators.

Accumulation Distribution Line: A momentum indicator that relates price changes with volume. It relates the closing price to the range of prices (H – L). The closer the close is to the high, the more volume is added to the cumulative total. See ChartSchool article on Accumulation Distribution Line.

Advance Decline Line: One of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal. See ChartSchool article on the Advance-Decline Line.

Advance Decline Ratio: The ratio of advancing issues over declining issues. Taking the moving average of the AD ratio will smooth it so it can be used as an overbought and oversold indicator.

Advancing Declining Issues: A market momentum indicator using the advancing issues and the declining issues. It subtracts the declining issues from the advancing ones and is usually smoothed to make it a good overbought oversold indicator.

ADX: See Average Directional Index.

Arms Index (TRIN): A market indicator showing the ratio between the average volume of declining stocks and the average volume of advancing stocks. Generally, a rising TRading INdex is bearish and a falling TRIN is bullish. See ChartSchool article on Arms Index.

Aroon: An indicator system that can be used to determine whether or not a stock is trending and the strength of its trend. The Aroon Oscillator signals an upward trend when it rises above zero and a downward trend when it falls below zero. The farther away the oscillator is from the zero line, the stronger the trend. See ChartSchool article on Aroon.

Aroon Oscillator: An indicator called the Aroon Oscillator can be constructed by subtracting Aroon(down) from Aroon(up). Since Aroon(up) and Aroon(down) oscillate between 0 and +100, the Aroon Oscillator oscillates between -100 and +100 with zero as the center crossover line. See ChartSchool article on Aroon Oscillator.

Average Directional Index (ADX): Part of the Directional Movement Indicator system developed by J. Welles Wilder, the ADX line is based on the spread between the +DI and -DI lines from that same system. See ChartSchool article on Average Directional Index.

Average True Range (ATR): An indicator that measures a security’s volatility. High ATR values indicate high volatility and may be an indication of panic selling or panic buying. Low ATR readings indicate sideways movement by the stock. See ChartSchool article on Average True Range.

Bollinger Band Width: This is an indicator tool in StockCharts.com’s charting service. It will display the width of Bollinger Bands as an indicator on your chart. See ChartSchool article on Bollinger Band Width.

Bollinger Bands: An indicator that allows users to compare volatility and relative price levels over a period of time. It consists of three bands designed to encompass the majority of a security’s price action. Prices will often meet resistance at the upper band and support at the lower band. See ChartSchool article on Bollinger Bands.

Breadth Thrust: Martin Zweig developed this momentum indicator that illustrates a “thrust” when, during a 10 day period, the average number of issues that are advancing goes from below 40% to above 61.5%. This means the market went from being oversold to one of strength, but is not yet considered overbought.

Bull Bear Ratio: The Investor’s Intelligence market sentiment indicator which shows the relationship between bullish and bearish advisors. It is interpreted as a contrary indicator, meaning that if it reflects extreme bullishness, the market is probably at a top.

Bullish Percent Index (BPI): A popular market breadth indicator that is calculated by dividing the number of stocks in a given group (an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group. BPI can be used to determine overbought/oversold conditions and can generate buy/sell signals. It is important to note that the Bullish Percent Index is not something that can be applied to a single stock but rather an index that is calculated for a group of stocks. See ChartSchool article on Bullish Percent Index (BPI).

Chaikin Money Flow (CMF): An oscillator that helps signal if a stock is undergoing accumulation or distribution. It is calculated from the daily readings of the Accumulation Distribution Line. The CMF is unlike a momentum oscillator in that it is not influenced by the daily price change. Instead, the indicator focuses on the location of the close relative to the range for the period (daily or weekly). See ChartSchool article on Chaikin Money Flow.

Chaikin Oscillator: This is a moving average of the Accumulation Distribution Line. It was developed by Marc Chaikin. It is created by subtracting a 10 period exponential moving average of the accumulation/distribution line from a 3 period exponential average of it.

Commodity Channel Index (CCI): Developed by Donald Lambert, the CCI is an indicator designed to identify cyclical turns in commodities. It may also be applied to stocks or bonds. See ChartSchool article on Commodity Channel Index.

Directional Movement Indicator (DMI): An indicator that plots a positive +DI line measuring buying pressure and a negative -DI line measuring selling pressure. The DMI pattern is bullish as long as the +DI line is above the -DI line. The Average Directional Index line is derived from this system and is based on the spread between the +DI and -DI lines. For more, see our ChartSchool article on the Average Directional Index.

Envelopes: Lines that are placed at fixed percentages above and below a moving average line. Envelopes help determine when a market has traveled too far from its moving average and is overextended. See ChartSchool article on Moving Average Envelopes.

Exponential Moving Average (EMA): A moving average that gives greater weight to more recent data in an attempt to reduce the lag of (or “smooth”) the moving average. See ChartSchool article on Moving Averages.

MACD (Moving Average Convergence/Divergence): An indicator developed by Gerald Appel that is calculated by subtracting the 26-period exponential moving average of a given security from its 12-period exponential moving average. By comparing moving averages, MACD displays trend following characteristics, and by plotting the difference of the moving averages as an oscillator, MACD displays momentum characteristics. See ChartSchool article on MACD.

MACD Histogram: A visual representation of the difference between the MACD line and the MACD signal line. The plot of this difference is presented as a histogram, making the centerline crossovers and divergences easily identifiable. See ChartSchool article on MACD histogram.

McClellan Oscillator: A breadth indicator derived from each day’s net advances (the number of advancing issues less the number of declining issues). Similar to MACD, the McClellan Oscillator is a momentum indicator that is applied to the advance/decline statistics. As a momentum indicator, the McClellan Oscillator attempts to anticipate positive and negative changes in the AD statistics for market timing. Buy and sell signals are generated as well as overbought and oversold readings. Traders may also look for positive or negative divergences to time their trades. See ChartSchool article on McClellan Oscillator.

McClellan Summation Index: A popular market breadth indicator that is ultimately derived from the number of advancing and declining stocks in a given market. Many people regard it as an excellent indicator of the overall “health” of the market and the market’s current trend. It was developed by Sherman and Marian McClellan and first presented in their book “Patterns for Profit,” available from McClellan Financial Publications (http://www.mcoscillator.com/).

Momentum: A leading indicator measuring a security’s rate-of-change. The ongoing plot forms an oscillator that moves above and below 100. Bullish and bearish interpretations are found by looking for divergences, centerline crossovers and extreme readings.

Money Flow Index (MFI): A volume-weighted momentum indicator that measures the strength of money flowing in and out of a security. It compares “positive money flow” to “negative money flow” to create an indicator that can be compared to price in order to identify the strength or weakness of a trend. The MFI is measured on a 0 – 100 scale and is often calculated using a 14 day period. See ChartSchool article on Money Flow Index (MFI).

Moving Average (MA): An average of data for a certain number of time periods. It “moves” because for each calculation, we use the latest x number of time periods’ data. By definition, a moving average lags the market. An exponentially smoothed moving average (EMA) gives greater weight to the more recent data, in an attempt to reduce the lag. See ChartSchool article on Moving Averages.

Negative Directional Indicator (-DI): When the ADX Indicator is selected, SharpCharts plots the Positive Directional Indicator (+DI), Negative Directional Indicator (-DI) and Average Directional Index (ADX). With the black, green and red color scheme on SharpCharts, -DI is the red line that measures the force of the down moves over a set period. The default setting is 14 periods.

Net New Highs: Market breadth indicators that can be used to identify strength or weakness behind market moves. Net new highs are found by subtracting the number of new lows from the number of new highs and are usually calculated for the NYSE, Nasdaq and Amex.

On Balance Volume (OBV): One of the first and most popular indicators to measure positive and negative volume flow, the OBV was introduced by Joe Granville in 1963. The concept behind the indicator is that volume precedes price. OBV is a simple indicator that adds a period’s volume when the close is up and subtracts the period’s volume when the close is down. A cumulative total of the volume additions and subtractions forms the OBV line. This line can then be compared with the price chart of the underlying security to look for divergences or confirmation. See ChartSchool article on On Balance Volume (OBV).

Parabolic SAR: An indicator that sets trailing price stops for long or short positions. Also referred to as the “stop-and-reversal indicator”, Parabolic SAR is more popular for setting stops than for establishing direction or trend. If the trend is up, buy when the indicator moves below the price. If the trend is down, sell when the indicator moves above the price. See ChartSchool article on Parabolic SAR.

Percentage Price Oscillator (PPO): An indicator based on the difference between two moving averages expressed as a percentage. The PPO is found by subtracting the longer moving average from the shorter moving average and then dividing the difference by the shorter moving average. See ChartSchool article on Price Oscillators.

Percentage Volume Oscillator (PVO): The percentage difference between two moving averages of volume.

Percent Investment Advisors Bullish: A measure of stock market bullish sentiment that is published weekly by Investor’s Intelligence. When only 35% of professionals are bullish, the market is considered oversold. A reading of 55% is considered to be overbought.

Positive Directional Indicator (+DI): When the ADX Indicator is selected, SharpCharts plots the Positive Directional Indicator (+DI), Negative Directional Indicator (-DI): and Average Directional Index (ADX). With the black, green and red color scheme on SharpCharts, +DI is the green line that measures the force of the up moves. The default setting is 14 periods.

PPO: See Percentage Price Oscillator.

Price By Volume: A horizontal histogram that overlays a price chart. The histogram bars stretch from left to right starting at the left side of the chart. The length of each bar is determined by the cumulative total of all volume bars for the periods during which the closing price fell within the vertical range of the histogram bar. See ChartSchool article on Price By Volume.

Price Channels: Similar to Bollinger Bands, price channels form boundaries above and below the price line and can be used as indicators of volatility. Price channels are created by specifying a number of periods that will chart an n-period high or low around the price line. See ChartSchool article on Price Channels.

Price Oscillator (PO): An indicator based on the difference between two moving averages that is expressed as either a percentage or in absolute terms. The abbreviation PPO refers to the Percentage Price Oscillator and APO refers to the Absolute Price Oscillator. See ChartSchool article on Price Oscillators.

Put/Call Ratio: Based on CBOE statistics (http://www.cboe.com/), the Put/Call Ratio equals the total number of puts divided by the total number of calls. When more puts are traded than calls, the ratio will exceed 1. As an indicator, the Put/Call Ratio is used to measure market sentiment. When the ratio gets too low, it indicates that call volume is high relative to put volume and the market may be overly bullish or complacent. When the ratio gets too high, it indicates that put volume is high relative to call volume and the market may be overly bearish or in panic. StockCharts.com charts the Put/Call ratio under the symbol $CPC.

Rate-of-Change (percent): A momentum oscillator that measures the percent change in price from one period to the next. The plot forms an oscillator that fluctuates above and below the zero line as the rate-of-change moves from positive to negative. The oscillator can be used as any other momentum oscillator by looking for higher lows, lower highs, positive and negative divergences, and crosses above and below zero for signals. See ChartSchool article on Rate of Change and Momentum.

Relative Strength Index (RSI): A popular oscillator developed by Welles Wilder, Jr. and described in his self-published 1978 book “New Concepts in Technical Trading Systems”. RSI is plotted on a vertical scale from 0 to 100. Values above 70 are considered overbought and values below 30, oversold. When prices are over 70 or below 30 and diverge from price action, a warning is given of a possible trend reversal. See ChartSchool article on Relative Strength Index.

RSI: See Relative Strength Index.

Signal Line: Also known as a “trigger line”, it is a moving average of another indicator that is used to generate simple buy and sell signals. Probably the most used signal line is the one that is built into the MACD Indicator display. The signal line is the exponential moving average of the MACD line. A buy signal is generated when the MACD line crosses above the signal line and a sell signal is generated when the MACD line crosses below the signal line.

Simple Average: A moving average that gives equal weight to each day’s price data.

Slope: A simple indicator equal to the change in price divided by the number of time periods. A positive slope begins low and rises over time with a steeper rise illustrating a greater slope. A negative slope begins high and declines over time with a steeper decline illustrating a more negative slope.

Stochastic Oscillator: A momentum indicator developed by George Lane that measures the price of a security relative to the high/low range over a set period of time. The indicator oscillates between 0 and 100, with readings below 20 considered oversold and readings above 80 considered overbought. A 14-period Stochastic Oscillator reading of 30 would indicate that the current price was 30% above the lowest low of the last 14 days and 70% below the highest high. The Stochastic Oscillator can be used like any other oscillator by looking for overbought/oversold readings, positive/negative divergences and centerline crossovers. See ChartSchool article on Stochastic Oscillator.

StochRSI: An oscillator used to identify overbought and oversold readings in RSI. Because RSI can go for extended periods without becoming overbought (above 70) or oversold (below 30), StochRSI provides an alternative means to identify these extremities. StochRSI is found by applying the Stochastics formula to RSI readings – hence its name. As an indicator of RSI, it measures the value of RSI relative to its high/low range over a set number of periods. When RSI records a new low for the set period, StochRSI will be at 0. When RSI records a new high for the set period, StochRSI will be at 100. See ChartSchool article on StochRSI.

Stocks Above Their 200-day Moving Average: A market breadth indicator that represents the number of stocks in a given group that have closing prices that are currently above their 200-day simple moving average. Common techniques for using this indicator include locating overbought/oversold levels and finding positive or negative divergences between this indicator and the underlying group’s composite index.

Stocks Above Their 50-day Moving Average: A market breadth indicator that represents the number of stocks in a given group that have closing prices that are currently above their 50-day simple moving average. Common techniques for using this indicator include locating overbought/oversold levels and finding positive or negative divergences between this indicator and the underlying group’s composite index.

Stop-And-Reversal Indicator: See Parabolic SAR.

Summation Index: A cumulative sum of all daily McClellan oscillator readings that provides longer range analysis of market breadth.

TICK: Each individual move from one stock trade to another. An UP-TICK means the price moved up on the last trade and a DOWN-TICK means it moved down. If there is no change from the last trade, the TICK is considered neutral. The TICK statistic on the NYSE is the net of all UP-TICKs minus all DOWN-TICKs at a given point during the day. If 1000 stocks advanced on their last trade or TICK, 500 declined and 200 were unchanged, the TICK would be +500 (1000 minus 500 equals +500). The closing TICK is based on the last trade of the day. TICK statistics are available for the NYSE, Nasdaq and AMEX.

Trigger Line: See Signal Line.

TRIN: See Arms Index.

TRIX: A momentum indicator showing the percent rate-of-change of a triple exponentially smoothed moving average. Like other oscillators, TRIX oscillates around a zero line. Its triple exponential smoothing makes it an excellent filter of market noise and it functions well as a leading indicator of market trends. See ChartSchool article on TRIX.

Ultimate Oscillator: An oscillator that attempts to combine information for several different time periods into one number. Three different time periods are used, typically a 7-day period, a 14-day period, and a 28-day period. The resulting oscillator is “bounded” in that it moves between 0 and 100 with 50 as the center line. 70 and 30 are used as overbought/oversold levels. See ChartSchool article on the Ultimate Oscillator.

Volume Oscillator: See Percentage Volume Oscillator.

Weighted Average: A moving average that uses a selected time span, but gives greater weight to the more recent price data. Weighted Close A weighted average of the high, low and close that places more weight on the closing value by counting it twice.

Williams %R: Developed by Larry Williams, Williams %R is a momentum indicator much like the Stochastic Oscillator and 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. Typically, Williams %R is calculated using 14 periods and can be used on intraday, daily, weekly or monthly data. See ChartSchool article on Williams %R.

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