The Price Momentum Oscillator (PMO) is an ROC-based study developed by Carl Swenlin. PMO is essentially one-bar rate of change (relative momentum) consequently smoothed by two exponential moving averages. In addition to the main plot, the PMO study also shows a signal line: the PMO line smoothed again by a third exponential moving average.
The main PMO line oscillates around the zero level. Extremely high readings of the PMO indicator may suggest that the stock or index is currently overbought. Vice versa, extremely low readings may signify that the stock or index is oversold.
In addition, one may find beneficial looking for divergences between the price plot and the PMO line. These divergences may signify important changes in the trend.
Lastly, bullish and bearish crossovers of the main line and the signal line may be used as potential buy or sell signals.
||The price to be used in the calculation of PMO.|
||The length of the first exponential moving average to smooth the rate of change with.|
||The length of the second exponential moving average to smooth the rate of change with.|
||The length of the exponential moving average to be used as the signal line.|
||The main PMO plot.|
||The signal line, an exponential moving average of PMO.|
||The zero level.|