Chaikin Money Flow Stocks Analysis & Money Flow Signals

Developed by Marc Chaikins

This an oscillator which measure the Accumulation/distribution of money that is flowing into and out of a stocks.

The indicator is based on the fact that the nearer the closing price is to the high of the price, the more the accumulation of the stocks.

Also the nearer the closing price is to the low of the price, the more the distribution of the stocks.

Chaikin Money Flow will be positive if price consistently closes above the bar's midpoint with increasing volume.

However, if price consistently closes below the bar's midpoint with increasing volume the indicator will be negative.

Stocks Analysis and Generating Signals

Buy Signal

A crossover of above zero signifies accumulation of a stocks. A value of above +10 is a buy/bullish signal. Values above +20 signify a strong upward trending market.

Buy Signal

Sell Signal

A Zero line cross of below zero signifies distribution of a stocks. A value of below -10 is a short/sell signal. Values below -20 signify a strong downward trending market.

Sell Signal

Trend Line break with Chaikin’s money Flow

The money flow can be used to confirm trend line breaks out or support/resistance level breaks out.

If price breaks an upward trend line, traders should then wait for a confirmation signal from the indicator values of below -10.

Trend-Line Break

If price breaks an downward trend line, traders should then wait for a confirmation signal from indicator values of above +10.

Trend-Line Break

Divergence Stocks

A divergence between this indicator and price often signals a pending reversal in market direction. However as with all divergences its best to wait for confirmation signals before trading the divergence.

A bullish divergence signal forms when the price makes lower low while the Chaikin Money Flow makes a higher low.

A bearish divergence signal occurs when price makes a higher high while the Chaikin Money Flow indicator makes lower high.