THE HAndbook oF TEcHnIcAl AnAlySISor consolidate. This is useful for gauging behavioral or regime changes in the
market. It may be potentially helpful for traders deciding whether to employ a
trend‐following or range‐bound strategy.
price‐based Volume Indicators: the Chaikin Money
flow and Chaikin Oscillator
The Chaikin Money Flow (CMF) is calculated in a manner similar to the ADL.
First calculate the value of the multiplying factor [[(C − L) − (H − C)]/(H − L) ×
current period’s volume]. Let this value be S. Then calculate the N‐period sum of
S and divide this by the N‐period sum of volume. This will represent the N‐period
CMF. Just as for the ADL, create a running total for CMF. The Chaikin oscillator
is then calculated by simply subtracting a longer‐term EMA from a shorter‐term
EMA of the running total. In Figure 6.43, we see the Chaikin oscillator generat-
ing an earlier sell or bearish signal when compared to the CMF. We also see the
oversold levels on both oscillators indicating a potential market bottom in Copper
around the month of October 2011.
non‐price‐based Volume breadth Indicator: the nYse
up/Down Volume
The NYSE Up/Down Volume indicator is the ratio of advancing volume over de-
clining volume. Being non‐price-based, divergence is read in the same manner as
for volume bar action and smoothed and detrended volume. In Figure 6.44, we
observe the NYSE U/D indicator signaling an early bearish signal that was later
confirmed by the NYSE Composite Index.
fIgure 6.42 OBV and ADL Signaling Trend and Range Mode on the Daily Chart of
Exxon Mobile Corp.
Courtesy of Stockcharts.com