The Chaikin Oscillator is used to monitor the flow of money in and out of the market - comparing money flow to price action helps to identify tops and bottoms in short and intermediate cycles. He suggests that it be used in conjunction with a 21 day price envelope and an overbought/oversold indicator (such as Momentum or RSI). Trading Signals
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The best signals are divergences:
- Go long on a bullish divergence.
- Go short on a bearish divergence.
- Microsoft Corporation with
- Price envelopes (at 10% around a 20 day exponential moving average) and
- Chaikin oscillator.
1. Go long [L] on bullish divergence.
2. Go short [S] on bearish divergence.
3. Go long [L] on bullish divergence. This position is stopped out when price falls below the recent low.
4. Bullish triple divergence. Re-enter long position [L].
5. Go short [S] on bearish divergence.