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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.
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