Reverse Chande Momentum Oscillator

The Reverse Chande Momentum Oscillator indicator provides a dual-purpose predictive tool that calculates the exact price levels required for the Chande Momentum Oscillator (CMO) to reach specific values or maintain its current momentum.

Usage

The indicator is used to anticipate momentum shifts by projecting price levels onto the chart via an information box. Traders can use these levels to set precise entry or exit orders based on where the CMO is expected to cross key thresholds.

• Zero-Line Cross: Monitors the price level where the CMO crosses 0. A cross above suggests a bullish trend shift, while a cross below suggests a bearish shift.
• Overbought/Oversold Levels: By default, levels are set at +50 and -50. The tool calculates the price needed to hit these zones, allowing for better risk management before an extreme reading occurs.
• Momentum Equality: The script identifies the price required for the CMO to equal its previous value, helping traders identify when momentum is stalling or accelerating.
• Signal Line: An optional EMA signal line is included; the indicator can display the price level required for the CMO to crossover or crossunder this signal line.

Details

The Chande Momentum Oscillator (CMO), developed by Tushar Chande, calculates the difference between the sum of recent gains and losses, divided by the sum of all price movement. Unlike other oscillators like RSI, it uses unsmoothed data in the numerator, making it more sensitive to price changes.

This specific implementation reverse-engineers the CMO formula. By solving the equation for price, the tool can determine the "future" price needed to achieve a specific oscillator result. This removes the "lag" typically associated with waiting for an oscillator to close at a certain level.

Settings

Chande Momentum Properties

• Source: The price source used for calculations (default is Close).
• Length: The lookback period for the CMO calculation.

Chande Momentum Line Settings

• Color Type: Choose between a single color or a dual-color scheme that changes based on whether the CMO is rising or falling.
• Line Width: Adjusts the thickness of the CMO line.

Signal Line Settings

• Signal Length: Sets the period for the EMA signal line.
• Color Type: Toggle between single or dual-color logic for the signal line.

Scale Line Settings

• Upper Alert: The CMO value used for the overbought threshold (default 50).
• Midline: The zero-line setting.
• Lower Alert: The CMO value used for the oversold threshold (default -50).

Information Panel

• Show Info Box: Toggles the visibility of the on-chart data table.
• Show Alert Levels Info: Displays the calculated price targets for the alert levels.
• Info Box Offset: Moves the information box horizontally on the chart.

FAQ

How do I interpret the prices in the info box?

The info box displays the price the asset must reach during the current candle for the CMO to trigger a cross of the Zero Line, Signal Line, or Alert Levels.

What is the difference between CMO and RSI?

While both measure momentum, the CMO uses the total movement in the denominator and unsmoothed data, whereas the RSI uses smoothed averages of gains and losses.

How can I access this tool?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.