Awesome Oscillator

Description

Awesome oscillator is an another kind of Moving average convergence/divergence indicator just with predefined input parameters. AO calculates the difference between 34 period SMA and 5 period SMA smoothed with 5 period moving average.

Formula

5 period SMA - 34 period SMA

Most useful cases

• Divergence/Convergence - Divergence/Convergence pattern is a form of price action when new high(low) of the price not confirmed with a new high/low of AO. Such price and indicator’s behavior can be interpreted as the weakness of current existing trend.

• Crossing zero line - this is a trend reversing signal and it can be very useful in case of determining a correction of existing trend, beginning of a new trend wave or starting a new trend.