Description

• Founded by Tushar Chande and Stanley Kroll, it is a variation of RSI (Relative Strength Index) and more easy to understand
• It is used for finding over bought and sold situations arising in the price movement of an instrument
• It is more sensitive and leading than RSI as it considers momentum up & momentum down as input which are simply difference of prices

Interpretation

• NMO moving above +50 levels is an over-bought situation
• NMO moving below -50 levels is an over-sold situation
• Divergence between price and NMO helps to foreshadow reversals

Default Parameters Used/Inputs

• Close Line
• Bars

Returns/Output

NMO values of stock for the specified period

Formula

NMO = {(Sum Up – Sum Down) / (Sum Up – Sum Down)}*100
where, Up = Bar’s Momentum was up then previous bar
Down = Bar’s Momentum was less then previous bar