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ChaikinAD(period [, offset] ) - The Chaikin Accumulation Distribution Indicator is a measure of the money flowing into and out of a stock over the period
This indicator takes two inputs: period and an optional lag(offset) input. While 21 is the recommended period short or longer periods(7 or 60) days may also be useful in some ranking strategies. It is based on the principle that stocks which close above their mid-point particularly on high volume days are under accumulation and should be looked upon favorably.
The daily volume accumulation totals are aggregated over the period and the resulting accumulation/distribution is divided by the total trading volume of the period. This creates an indicator of supply and demand for a stock which ranges from -100 to +100 with any values of +/- 20 being very strong and very weak readings.
Ranking a universe of stocks by the ChaikinAD will give an accurate indication of strong to weak stocks based on volume accumulation Buying stocks which have strong fundamentals, have had a recent decline in price over the past 4- 7 days and still have a positive ChaikinAD value > 0 is a profitable strategy in a bull market
The Chaikin Accumulation Distribution Indicator of the money flowing into and out of a stock over the previous 4 weeks can be written as: ChaikinAD(21)
ChaikinMFP(period , lookback, [, offset] ) - This indicator calculates the percentage of days in the previous lookback window that the ChaikinAD is > 0
The Chaikin Money Flow Persistency Indicator takes three inputs a period, a lookback window and an optional lag(offset) input.
The recommended inputs are a period of 21 days and a lookback of 120. When configured this way the ChaikinMFP indicator measures the persistency of money flowing into a stock. This indicator calculates the percentage of days in the previous lookback window(120) that the ChaikinAD(21) is > 0 and as such it fluctuates from 0 -100.
- Any reading > 50 indicates positive money flow persistency over the past 6 months
- Readings > 80 indicate very strong accumulation in a stock over a long period of time, while crossed over the 80 level may indicate a stock which is entering a phase of extended upside price movement
Ranking a universe of stocks by the ChaikinMFP is a time tested way to identify stocks which may significantly outperform the market. Combining ChaikinMFP ranks with a 26 week relative strength to market rank and a high analysts earning estimate revision ranking is a powerful strategy, and also short version of Investor?s Business Daily's successful multi-stock rank.
The Chaikin Money Flow Persistency was the basis for IBD's Accumulation/Distribution Rank(A-E) although they use a shorter time frame of 65 days for a lookback
ChaikinTrend(period [, offset, increment] ) - The Chaikin Trend Indicator is a special purpose double smoothed exponential average
increment - value from 1-20. When set to 1 (the default) it calculates using daily values. A value of 5 can be used to calculate weekly values. Any other values can be used to chose different granularity.
The Chaikin Trend Indicator takes three inputs: a period, an optional lag(offset) and an increment (1 is for daily, 5 for weekly). This indicator uses closing price data and is an excellent and highly responsive trend indicator with very little lag.
The ideal time frame on a weekly basis is a period of 45, which can then be utilized by comparing the current close to the Chaikin Trend Indicator (Close(0)/ ChaikinTrend(45,0,5) to rank stocks, with a higher ranking being preferable.
A rate of change of the Chaikin Trend (ChaikinTrend(45,0,5) / ChaikinTrend(45,7,5) or a rate of change of the close/ChaikinTrend difference ((Close(0)/ChaikinTrend(45,0,5))/ ((Close(0)/ChaikinTrend(45,21,5)) can be used in a model to determine the trend of price momentum.
On a daily chart (increment=1) shorter term period values can be used to profit from moving average crossovers to buy stocks which are moving into uptrends. For example: Close(0)/ChaikinTrend(21,0,1)
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