How to do Chande Momentum Oscillator in Excel

Chande Momentum Oscillator Overview

Chande Momentum Oscillator or CMO attempts to address few drawbacks of RSI by frequently identifying overbought and oversold price movements. CMO technical indicator was developed by Tushar Chande and is similar to the RSI. You can read more about CMO in his bookThe New Technical Reader. Unlike RSI, the calculations are based on closing prices that have not been smoothed for extreme short term movements. Overbought and oversold movements can be identified frequently. The scale for the CMO ranges between -100 and +100. More details about this oscillator can be found in his book, The new Technical Trader. This post shows you step by step how to do Chande Momentum Oscillator in Excel.

CMO Calculation

CMO = \{\frac{Su - Sd}{Su + Sd}\} * 100

Su is the sum of the difference between today’s close and previous trading day’s close. Sd is the sum of the absolute difference between today’s close and previous trading day’s close.

Trading with Chande Momentum Oscillator

CMO oscillates between -100 and +100. An asset or a stock is considered overbought when the value is above 50 and oversold when the CMO is below -50. Traders are advised to exercise caution entering new long positions when the CMO is over 50 and entering fresh short positions when the CMO is under -50. A cross over to 0 can be an indication of a bullish pattern, while crossovers to below 0 can indicate a bearish move.

The automated how to do Chande Momentum Oscillator in Excel spreadsheet will be available soon. Stay tuned.

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