Accumulation/Distribution Line

Shows general flow of money, but does not take gaps into consideration. An uptrend indicates that buying pressure is prevailing and a downtrend indicates that selling pressure is prevailing. Its premise is that there is buying pressure when a stock closes in the upper half of a period's range and there is selling pressure when a stock closes in the lower half of the period's trading range.

Signals: positive and negative divergences.

Be wary of weak positive divergences that fail to make higher reaction highs or those that are relatively young. Look for at least a month of positive or negative divergence, a two-week positive divergence may be a bit suspect. A multi-month positive divergence deserves serious attention.

The Chaikin Oscillator (MACD applied to the Accumulation/Distribution Line)

Just as the MACD-Histogram is an indicator to predict moving average crossovers in MACD, the Chaikin Oscillator is an indicator to predict changes in the Accumulation/Distribution Line.

Signals: divergences and centerline crossovers. For best performance use both signals: look for confirmation of a positive divergence by a bullish moving average crossover and a bearish centerline crossover with negative divergence.


Parabolic SAR (stop-and-reversal indicator)

After establishing the trend trough other indicators, trade with Parabolic SAR in the direction of the trend. The dotted lines below the price establish the trailing stop for a long position and the lines above establish the trailing stop for a short position.

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