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Technical Analysis: Power Tools for Active Investors by Gerald Appel

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How to Construct a Price/Moving Average Differential Oscillator

Although patterns that develop within moving average trading channels tell their own story, sometimes relationships between price and moving average become clearer if the data that is reflected in the moving average trading channel is converted to a more familiar oscillator format.

As illustrated in Chart 9.4, the conversion is readily accomplished. This chart includes the Nasdaq Composite Index (daily based), with a 14-day moving average with band boundaries placed 6% above and below the 14-day moving average.

Chart 9.4. Constructing a Moving Average Price Oscillator: The Nasdaq Composite, January–April 2000

Chart 9.4 illustrates the conversion of moving average channel data ...

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