Chaikins Money Flow Oil Technical Analysis and Money Flow Trading Signals
Developed by Marc Chaikin
This an oscillator which measure the Accumulation/distribution of money that is flowing into and out of oil.
The indicator is based on the fact that the nearer the closing crude oil price is to the high of the oil price, the more the accumulation of oil.
Also the nearer the closing crude oil price is to the low of the oil price, the more the distribution of oil.
Chaikins Money Flow will be positive if crude oil price consistently closes above the bar's midpoint with increasing volume.
However, if crude oil price consistently closes below the bar's midpoint with increasing volume the indicator will be negative.
Oil Technical Analysis & How to Generate Trading Signals
Buy Trading Signal
A crossover of above zero signifies accumulation of oil. A value of above +10 is a buy/bullish signal. Values above +20 signify a strong upward trending market.
Buy Trading Signal
Sell Trading Signal
A Zero line cross of below zero signifies distribution of oil. A value of below -10 is a short/sell oil signal. Values below -20 signify a strong downward trending market.
Sell Trading Signal
Oil Trading Trend Line break with Chaikin’s money Flow
The money flow can be used to confirm oil trend line breaks out or support/resistance level breaks out.
If crude oil price breaks an upward oil trend line, Oil traders should then wait for a confirmation signal from the indicator values of below -10.
Oil Trading Trendline Break
If crude oil price breaks an downward oil trend line, Oil traders should then wait for a confirmation signal from indicator values of above +10.
Oil Trading Trendline Break
Divergence Oil Trading
A divergence between this indicator and crude oil 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 occurs when crude oil price makes a lower low while the Chaikins Money Flow makes a higher low.
A bearish divergence signal occurs when crude oil price makes a higher high while the Chaikins Money Flow makes a lower high.
