The CMO Abs was authored by Chande and Kroll for Omega Research 1997. The CMO Abs is a momentum indicator somewhat similiar to the Relative Strength Index (RSI). It uses the sum of the absolute difference between the current price and the last price, and also a prior price, to create an oscillator with a range of 0 to 100. Adjustable guides are given to fine tune the trading signals. The user may change the input (close), period and guide values. This indicator’s definition is further expressed in the condensed code given in the calculation below.
How To Trade Using CMO Abs
Adjust the top and bottom guides to control the quantity and quality of the trading signals. CMOF values above 70 to 80 are considered to be overbought and therefore offer an opportunity to sell. CMOF values below 30 to 20 are considered oversold and present an opportunity to buy. If the CMOF peaks above the top guide a sell signal will be generated. Conversely, if the CMOF troughs below the bottom guide a buy signal will be given. The 50 line divides the bulls (above) from the bears (below).
How To Access in MotiveWave
Go to the top menu, choose Study>Tushar Chande>CMO Abs
or go to the top menu, choose Add Study, start typing in this study name until you see it appear in the list, click on the study name, click OK.
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//input = price, user defined, default is closing price
//period = user defined, default is 9
//num = numerator, den = denomator
//abs = absolute value, prev = previous
//index = current bar number
lastV = price[index-1]; absDiff = abs(price-lastV) priorV = price[index-period]; num = abs(100 * (price - priorV)); den = sum(index, period, absDiff); Plot: cmoabs = num / den; //Signals prevC = cmoabs[index-1]; highSell = cmoabs for last sell signal, reset to max_negative at each buy signal; lowBuy = cmoabs for last buy signal, reset to max_positive at each sell signal; sell = (cmoabs moreThan topGuide) AND (prevC moreThan cmoabs) AND (cmoabs moreThan highSell); buy = (cmoabs lessThan bottomGuide AND prevC lessThan cmoabs) AND (cmoabs lessThan lowBuy);