Elder Ray Bear Index
Type
Momentum oscillator
Short introduction
The "Elder Ray", in implemented as separate indicators "Elder Ray Bull Index" and "Elder Ray Bear Index", actually represents a combination of trend follower and oscillator. The creator, Dr. Alexander Elder, developed this indicator to screen the market, similar to what doctors do with X-rays. The term "Elder Ray" is only the generic term for the two actual indicators.
The Elder Ray Bear Index indicates the so-called "Bear Power" and thus sets corresponding trading signals. Elder-Ray curves are displayed in separate charts.
Statement
For both indicators, an exponential MA is first calculated, in the case of Bear Power the MA is subtracted from the daily low. In Bear Power, a negative value means that the daily low is below the MA, while a positive value indicates that the daily low (and thus all prices of the day) is above the MA.
Formula/calculation
Bear Power = Day low - EMAn
where:
EMAn = Exponential Moving Average over n periods
The following MA variants can be used for smoothing via the parameters:
- Simple MA (SMA) - Default setting
- Exponential MA (EMA)
- Weighted MA (WMA)
Interpretation
The interpretation is primarily based on the search for divergences between the actual share price performance and the two elder-ray indicators. A negative signal is generated when the underlying is still climbing new highs while the indicator is not climbing any new highs. A positive signal is generated when the actual price trend is still establishing new lows but the indicator is no longer establishing new lows.
Default setting
- Period n: 13 periods
- Signal: 13 periods
- Smoothing: MA
Example: Elder Ray Bear Index
