Accumulation Distribution Accumulation Distribution tracks the relationship between price and volume and acts as a leading indicator of price movements. Accumulation Distribution is an enhancement of the On Balance Volume indicator. It first compares opening and closing prices to the trading range for the period, the result is then used to weight the volume traded. Go long when there is a bullish divergence. Go short when there is a bearish divergence.
The bullish divergence correctly predicted the subsequent rally. The bearish divergence signaled the correction in January. The bearish divergence signaled the correction in April. Setup Indicator Panel provides directions on how to set up an indicator. Edit Indicator Settings to change the default settings. How Good Is Your Market Analysis? Trading and the Economy, as well as new software updates.
The Accumulation Distribution Index is calculated as a cumulative total of each day’s reading. The Close is compared to the day’s range rather than to the Opening Price. Available on Incredible Charts free software. Download and receive a 30-day FREE TRIAL of our Premium Service. Copyright 2001 – 2018 Incredible Charts Pty Ltd.
Technical indicators are useful, but not in isolation. Many of you are familiar with what a price support breach is, but for those who don’t, here is a simplified definition. A price support breach occurs when the most recent low price for the stock or the index is “taken out” by a new, lower price. Another popular example of a price support breach is the event where the stock or index trades below its 50-day or 200-day moving average. When this happens, technical analysts will consider the event to be something meaningful, perhaps a warning of sorts.
The trouble with this type of breach is that the support price, whether it’s the 50-day or the 200-day or any other number of day moving average is arbitrary and often capricious. But my version of a price support breach is different in some important ways. First, it’s not based on an arbitrary moving average price. It’s based, instead, on a hard price that was observed at some date in the past. Moving averages change almost every day, but a support price doesn’t. Second, my version is not a binary choice.
Once the market breaches a key moving average price, the game is essentially over. The stock or the index in question is either above or below its moving average. With my version, the first breach means nothing, and it has virtually no information value by itself. It takes multiple breaches for my version of this indicator to begin raising the alarm that the price trend might be changing. Today, I’m going to do something I normally don’t do – reveal the “secret sauce” that goes into one of my key market indicators, my price support breach counter. Why would I do this, you might ask? Well, because I’m not really giving away the keys to the store.
I’m just giving away one recipe among many that I use in my models. Here is how I calculate support breaches Warning: This is going to get pretty deep into the weeds, so if you’re not into the whole math thing, go ahead and skip to the next two charts below. For the rest of you information junkies, here it is. They say there’s a thousand ways to skin a cat, and there’s also a thousand ways to slice and dice the historical price behavior of a stock or an index.