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Intraday
Momentum Index
Description
The
Intraday Momentum Index (IMI) was developed by
Tushar Chande. It
is a cross-breed between the RSI
and candlestick analysis.
For more information on the IMI, refer to
the book The New Technical Trader by Tushar
Chande and Stanley Kroll.
The
calculation of the IMI is very similar to the RSI,
except it uses the relationship between the
intraday opening and closing prices to determine
whether the day is “up” or “down.”
If the close is above the open, it is an up
day. If
the close is below the open it is a down day.
Therein lies its tie to candlestick
charting. For
those familiar with candlestick charting, the IMI
separates the black and white candlesticks and
performs a RSI calculation on the candlestick
bodies.
Interpretation
Overbought/oversold:
Index values above 70 indicate a potential
overbought situation with lower prices ahead.
Values below 30 indicate a potential
oversold situation with higher prices ahead.
As with all overbought/oversold indicators,
you should first quantify the trendiness of the
market before acting on the signals. Indicators
like the VHF, CMO,
and r-squared
can be used to gauge the trendiness of the market.
Divergences:
The basic premise behind the IMI, is that
shifts in intraday momentum lead shifts in
interday momentum. Look for divergences between
the indicator and the price action.
If the price trends higher (lower) and the
IMI trends lower (higher), then a reversal may be
imminent. |
