Morning Update - Indicators and Oscillators; Aroon, Williams %, PPO & ADX
This update is an answer to a couple of e-mails. This update will address the Aroon, Williams %, and the PPO and the reasons I use these Indicators. If you have a pattern or structure that is calling for higher prices, indicators and oscillators will actually lag behind the move in price. In contrast, when you can't really tell what the pattern or wave structure is, the indicators and oscillators will front run the move in price.
Is there any point that the Aroon cross is more significant than other times? When there is a bullish cross near the 70 line, it typically means that the bullish trend is stronger than it would be if the cross occurred below the 30 line. However, if the cross is below 30 it does not necessarily mean that it is not bullish, it is just weaker. In each case it depends on what the other indicators are doing. Please refer to the charts.
The williams% has to be above the -50 line in order for it to be bullish and trending. The Williams % is the most bullish when it is up above -20 and looking overbought. Please refer to the charts.
The PPO is similar to the MACD. However the PPO, picks up more subtleties that the MACD doesn't always catch. The PPO is most bullish when the gray line (the fast PPO), crosses the red line (slow PPO). The wider the gap between the two lines when it is rising, the faster the stock moves.
When the ADX is above 20 it is considered trending and when it is above 30 it is considered very strong. It does not matter whether it is on the buy side or the sell side. The green line is the plus DMI and the red line is the minus DMI.
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.
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.
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.
Monday April 10th 11:30am ET
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