The McClellan Oscillator is a smoothed momentum indicator that aids traders in assessing the strength of an asset’s current trend. Our McClellan Oscillator chart incorporates market data from our proprietary data warehouse and displays it as an oscillating line graph chart overlaid with a horizontal zero line.
Over a period of time, the rate of change in an asset’s price will cause the graph’s line to oscillate above and below the zero line. This movement above and below the zero line is what produces the chart’s trading signals.
When the oscillating line moves from below the zero line to above it, that is a bullish signal for traders seeking an entry. Conversely, when the oscillating line moves from above the zero line to below it, this indicates that a bearish move may be ahead and traders should consider their positions. Stronger signals are generated when the oscillating line moves from -100 or below to above the zero line. Conversely, if the oscillating line moves from 100 or above to below the zero line, a stronger sell signal is generated.
Weaker buy signals are produced when the oscillating line positioned above the zero line makes a move down towards the zero line but turns upwards again before crossing into negative territory. Weaker sell signals are produced when the oscillating line positioned below the zero line makes a move up towards the zero line but turns downward again before crossing into positive territory.
Reading the McClellan Oscillator chart in conjunction with a candlestick chart to judge the trending price action may also reveal divergence or reversal signals. For example, when bullish price action reaches a new higher high but is not confirmed by a new high on the McClellan Oscillator chart,
Bullish Divergence: Lower lows on the candlestick chart and higher lows on the McClellan Oscillator
Bearish Divergence: Higher highs on the candlestick chart and lower highs on the McClellan Oscillator
Hidden Bullish Divergence: Higher lows on the candlestick chart and lower lows on the McClellan Oscillator
Hidden Bearish Divergence: Lower highs on the candlestick chart and higher highs on the McClellan Oscillator.
It is recommended to consult additional charts within the Range Report such as the Average Directional Movement Index and RSI, to help confirm the strength of the McClellan Oscillator chart’s signals.