Market Strength Indicators

The term Market Strength is a little ambiguous. It may refer to refers to the broader market rather than single stock or commodity; but it may also refer to the strength of a particular trend of a given stock or commodity. The former may refer to a market index, such as the Dow Jones Industrial Index (DJI) or the number of advancing and declining stocks in a market; while the latter takes volume or open interest into consideration.

The advance/decline line and TRIN are popular Market Strength indicators for the broader market. The popular Market Strength indicators that can be used for individual stocks and commodities include On Balance Volume (OBV), Accumulation/Distribution, Chaikin A/D Oscillator, Money Flow Index (MFI), and Price By Volume (PBV).


Accumulation/Distribution (A/D)

<A/D
Accumulation/Distribution

Accumulation/Distribution (A/D) is a leading market strength indicator developed by Larry Williams. It compares the open, close, high and low of a security to determine whether the volume should be considered positive or negative for that period.

For A/D, volume is considered bullish when the price close is higher than the open and bearish when the price close is lower than the open. However, the amount of volume assigned to the indicator is dependent on the distance between the open and the close, and distance between ...

On Balance Volume (OBV)

OBV
On Balance Volume

On Balance Volume (OBV) is a market strength indicator developed by Joe Granville to determine positive and negative volume flow for a given security by comparing volume to price movements. It is a simple indicator that adds a time-frame's volume when the closing price is up and subtracts the time-frame's volume when the closing price is down. OBV is a running cumulative total of this volume.

If the closing price is higher than the previous closing price, then the new OBV is calculated using the formula: OBV = current Volume. Otherwise the new ...