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Importance of Chande momentum oscillator for stock market technical analysis

About the Chande Momentum Oscillator

The Chande Momentum Oscillator takes its name after it developer Tushar Chande who is a well-known stock analyst. The chande momentum oscillator helps greatly in the stock market technical analysis as it aids the traders to assess the profits and losses. These gains or losses are resulted as a result of the price movement direction and flow for a given amount of time period. There are many other oscillators that are used for stock market technical analysis in addition to the Chande momentum and these include the RSI (Relative strength index) and stochastic oscillator.

There is a defined formula which has been designed to measure and calculate the chande momentum in the stock market to assess the stock’s value based on the price movement and fluctuations. The formula is discussed in the article later on. So generally speaking, the chande momentum is helpful to calculate the market value (profit and loss margins) for the immediate future i.e. coming the day or the functions of the stock assets in the past day i.e. yesterday.

Formula for Chande Momentum Oscillator

The formulae to measure chande momentum oscillation for stock market technical analysis is

Su – Sd / Su + Sd * 100

The chande momentum oscillator, better known as CMO is measured by using the above-mentioned formula. According to the formula, you can calculate the momentum oscillations by dividing the difference of the upper closes (subtraction) by sum of values of the lower closes (addition). The end result is then multiplied by 100. The end product obtained is known as the value for CMO for a given specified time period.

How is it used to calculate the stocks in the market?

It is not much difficult for the traders and analysts to calculate and assess the Chande momentum oscillations for stock market technical analysis since there is a defined formula that has been presented to measure it. It is, however, important to specify certain things in this respect. Since the CMO measure the upper close oscillations difference in the values, this is known as the overbought’ while the sum of the lower oscillations is termed as the oversold’. The obtained figure through this division is then multiplied with a 100 to get a final end product. This end product is the chande momentum for the stock assets.

Interpreting the CMO results

The traders can use this value in the stock market technical analysis to predict the stock price movement and expected profits or loss of the stocks, commodities, and equities in the stock market. As the CMO is actively helping the traders in a stock market technical analysis, it is important to be able to interpret the results. The results of the Chande momentum oscillator are represented in a form of graphical illustrations i.e. straight and curved lines. The signals for sale and purchase are read from this graph through the help of straight lines, center lines, and curved bell lines.

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About Emaad Qureshi