Chande Momentum Oscillator
Momentum
Tushar Chande's variant on the RSI. The key difference: the CMO does not divide by a smoothed average, which makes it faster and cleaner and lets it use the full range from -100 to +100.
Construction & calculation
- Over 14 periods, add up all the gains (Su) and all the losses (Sd).
- CMO = 100 x (Su - Sd) / (Su + Sd).
- No exponential smoothing, unlike the RSI.
CMO = 100 x (sum of gains - sum of losses) / (sum of gains + sum of losses)
Interpretation
- Above +50: overbought. Below -50: oversold.
- Around 0: buyers and sellers are in balance.
- The absolute value of the CMO is also a trend-strength measure: the further from zero, the more one-sided the market.
How the signal works in this scanner
Buy signal (green)The CMO has returned above -50 from below -50 within the last 15 bars and is still above it: the oversold extreme has been digested.
Sell signal (red)The CMO has fallen back below +50 from above +50 and is still below it.
Watch-outs & pitfalls
- Because the CMO is not smoothed, it jumps more sharply on news than the RSI. That is an advantage for timing and a disadvantage for calm.
- The scanner waits for the recovery out of the extreme zone rather than for it being reached — that avoids buying while a stock is still free-falling.