CMO

Overview of the Chande Momentum Oscillator calculation.

The Chande momentum oscillator is a technical momentum developed by Tushar Chande. His formula calculates the difference between the sum of recent gains and the sum of recent losses and then divides the result by the sum of all price movements over the same time period.

The indicator oscillates between +100 and -100 and is similar to other momentum indicators such as Welles Wilder’s RSI. It measures momentum on both up and down days and does not smooth results. This method triggers more frequent oversold and overbought occurrences.

An instrument is considered to be overbought when the Chande momentum oscillator is above +50 and oversold when it is below -50. The oscillator can be used as a confirmation signal when it crosses above or below the 0 line. Trend strength can also be measured using the CMO as the oscillator's value denotes the strength or weakness of the expected trend. Bear in mind that the chosen time frame will affect the signals generated by the indicator.

The source code for the CMO function is available here.

/* CMO calculation is mostly identical to RSI.
 * 
 * The only difference is in the last step of calculation:
 *
 *   RSI = gain / (gain+loss)
 *   CMO = (gain-loss) / (gain+loss)
 * 
 * See the RSI function for potentially some more info 
 * on this algo.
 */