Elder Ray Bull 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 Bull Index indicates the so-called "Bull 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 Bull Power the MA is subtracted from the daily high. A value above the zero line in the Bull Power indicates that the daily high is above the MA, a negative value indicates that the daily high (and thus all prices of the day) is below the MA.
Formula/calculation
Bull Power = Daily high - 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 Bull Index
