The Chande Momentum Oscillator(CMO) is closely related to other momentum indicators. It differs from Relative Strength Index and Stochastic Oscillator by using information from both up and down days.

The usual method of interpreting the CMO is to look for overbought and oversold conditions. Generally the overbought level is at +50 and the oversold level at -50. These levels are approximate to the 70/30 levels on the RSI. Either condition is a strong indicator of a change in the trend of buying/selling.

This oscillator is also useful to spot trends, used in a similar manner as the Vertical Horizontal Filter(VHF). The higher the CMO the stronger the trend. Buy when a long period CMO crosses above the short period moving average of the CMO. Sell at the converse.

Deceloped by Tushar Chande and Stanley Kroll, this oscillator is described in their book “The New Technical Trader”.

 

Calculation:

                If Price>PrevPrice then

                                               Up = Price – PrevPrice, Down=0

                If Price<PrevPrice then

                                               Down = PrevPrice – Price, Up=0

 

Inputs:

 

Data Array = Close

Indicates Open, High, Low or Closing price.

Period = 20

Indicates time period(the number of days for daily analysis, the number of weeks for weekly analysis, etc.).

 

Indicator Type: Momentum