Technical

Use the McClellan Oscillator to Identify Overbought and Oversold Market Conditions

The McClellan Oscillator is a market breadth indicator used to measure the difference between the number of advancing NYSE issues and those that are declining. Developed by Sherman and Marian McClellan in 1969, the oscillator leverages exponential moving averages (EMA) and is primarily used for short and intermediate-term trading.

What is an Exponential Moving Average?

A [...]

A Pairs Trading Stock Investing Strategy

Pairs trading or “statistical arbitrage” is a stock trading strategy through which the investor simultaneously buys and sells two (normally) correlated stocks when they diverge from their typical pattern with the expectation of capturing a profit when the pattern returns to normal. Pairs trading is a market neutral position that enables the investor to [...]

Identify a Double Top on a Stock Chart

A double top occurs on a stock chart when a stock price rises, drops, and rises to the same level before dropping again- this time below the lowest low (the confirmation point) of the pattern. A double top is sometimes referred to as an “M formation” because of the pattern it creates on the [...]

Calculate and Interpret the Percentage Price Oscillator (PPO)

The Percentage Price Oscillator or “PPO” is an indicator used by technical investors to measure momentum by demonstrating the relationship between two moving averages. Two inputs are required to calculate the PPO: a shorter-term and a longer-term exponential moving average (EMA). To perform the calculation, the longer term EMA is subtracted from the shorter-term [...]

Identify a Double Bottom on a Stock Chart

A double bottom is a term used in technical analysis to describe a drop in the price of a stock, index, or another security, a price rebound, a subsequent drop to the same level and another rebound. Many technical analysts believe that a true double bottom forms only when the rebound from the first [...]

Interpret the Doji on Candlestick Stock Charts

All stock market investors, whether they subscribe to technical analysis, fundamental analysis, a combination of the two, or any other approach to stock investing should develop a familiarity with stock charts. Candlestick charts, in particular, offer a great deal of information regarding price behavior. A Doji is one particular formation investors can look [...]

Calculate the Relative Vigor Index in Technical Analysis

The Relative Vigor Index (RVI) is used by technical analysts under the theory that prices tend to close higher than their open in upward-trending markets and lower than their open in downward-trending markets. Thus the “vigor” of the move is determined by where the prices are at the close of market. Originally constructed [...]

Calculate and Interpret the Accumulation/Distribution Indicator

Accumulation/Distribution is a technical indicator that tracks momentum by measuring supply and demand to determine whether investors are in general “accumulating” or “distributing” (buying or selling) a particular asset. The accumulation/distribution indicator seeks to identify divergences between the price of the asset and the associated volume and can serve as a leading indicator for [...]

Calculate and Interpret the Close Location Value (CLV)

Close location value (CLV) is a measurement used in technical analysis to measure the closing price of an asset is relation to its high and low prices for the day. The CLV calculates within a range between +1 and -1, where a measure of +1 means that the closing price was equal to the [...]

Video Tutorial: The Basic Types of Stock Charts

A stock chart or “price chart” is a graphical illustration of stock prices plotted over a specified period of time. Stock charts are one of the primary tools of technical analysts who study past price behavior in order to predict future price direction. Stock charts can also offer important data to any fundamental [...]