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Technical Indicators

Wed, Jun 4th, 2025
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The descriptions, formulas, and parameters shown below apply to both Interactive Charts and Snapshot Charts, unless noted. Please note that some of the parameters may be slightly different between the two versions of charts.
Studies noted with * are available only in Snapshot Charts and those noted with ^ are available only in Interactive Charts.
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Price Momentum Oscillator

Indicator Type: Standalone

Chart Type: Interactive Only

Developed by Carl Swenlin, the DecisionPoint Price Momentum Oscillator (PMO) is an oscillator based on a Rate of Change (ROC) calculation that is smoothed twice with exponential moving averages that use a custom smoothing process. Because the PMO is normalized, it can also be used as a relative strength tool. Stocks can thus be ranked by their PMO value as an expression of relative strength.

The PMO oscillates in relation to a zero line. Normally, the PMO direction indicates if strength is increasing or decreasing, while the steepness of the trend angle demonstrates the power behind the move. Since this is an internal ratio calculation (versus external, like the standard relative strength calculation, which divides one price by another price index), it returns a result that is normalized and can be compared to the PMO result of any other security or index. Therefore, chartists can rank a list of securities or indexes in relative strength order simply by using their PMO values. The list does not have to be homogeneous; the PMO can be used to rank market indexes, stocks and mutual funds in the same list.

An indicator that looks very similar to the PMO is the MACD (Moving Average Convergence-Divergence) indicator invented by Gerald Appel. The main difference between the PMO and MACD is the absolute value of each indicator. The MACD is based on moving average calculations - one stock's MACD reading bears no relationship to another's - whereas the PMO, as explained above, is an internal ratio. The chart below shows the PMO and MACD together.

While the PMO and MACD have similar shapes on shorter-term charts, the advantage of the ratio-type calculation for the PMO is evident on longer-term charts because the PMO is fairly constant, unlike the MACD.

While +2.5 to -2.5 is the usual range for broad stock market indexes, each price index will have its own “signature” range. Always check a longer-term chart to verify the normal range for the index you are analyzing. Also, remember that technical indicators are calculated based on a specific number of time periods within the timeframe being addressed, so a monthly PMO looks completely different from a daily PMO.

Sample Chart:

Price Momentum Oscillator

As a momentum indicator, the PMO expresses the direction and velocity of price movement. In this regard, it is much like other momentum indicators. More halting trends usually are accompanied by frequent PMO direction changes. PMO bottoms and tops suggest that price momentum has shifted direction, so they can provide early flags to price tops and bottoms. They are usually more reliable when the PMO is in overbought or oversold territory. Finally, like other oscillators, the PMO gives hints of important direction changes by forming divergences against the price index.

The PMO generates a crossover signal when it crosses through its 10-period EMA. These signals tend to be short-term in duration, but they can last for several weeks. Do not take them at face value because they can whipsaw quite a bit. They should be used to alert you to possible trading opportunities, rather than as a mechanical trading model. Always check the chart to verify the price pattern and the configuration of the PMO. Signals are best when price appears extended, is near support or resistance, and the PMO is very overbought or oversold.

The most reliable signals are generated when the PMO is near the extremes of its normal range, or when a direction change and crossover occurs following a strong, clean, straight PMO move. Quite a bit of “noise” can be generated around the zero line and while the PMO is moving in a relatively flat pattern.

Calculation:

The Price Momentum Oscillator is derived by taking a 1-period rate of change and smoothing it with two custom smoothing functions. The custom smoothing functions are very similar to Exponential Moving Averages, but, instead of adding one to the time period setting to create the smoothing multiplier (as in a true EMA), the smoothing functions just use the period by itself.

Smoothing Multiplier = (2 / Time period)  

Custom Smoothing Function = {Close - Smoothing Function(previous day)} *  Smoothing Multiplier + Smoothing Function(previous day)   

PMO Line = 20-period Custom Smoothing of (10 * 35-period Custom Smoothing of  ( ( (Today's Price/Yesterday's Price) * 100) - 100) )  

PMO Signal Line = 10-period EMA of the PMO Line

Default Parameters:

Period1 (35) - used in the calculation of the PMO Line
Period2 (20) -used in the calculation of the PMO Line
Period3 (10) - the number of periods to use for the PMO Signal Line
Zero (0) - an optional zero line

Source: Stockcharts.com

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