from prior research on by such well-known technicians as Joseph Granville,
, and Marc Chaikin, Mr. set out to develop a volume-based
indicator to help in both short- and long-term analysis.
The KO was developed with two seemingly opposite goals in mind: to be sensitive
enough to signal short-term tops and bottoms, yet accurate enough to reflect the
long-term flow of money into and out of a security.
The KO is based on the following tenets:
Price range (i.e. High - Low) is a measure of movement and is the force behind
the movement. The sum of High + Low + Close defines a trend. Accumulation occurs when
today's sum is greater than the previous day's. Conversely, distribution occurs when
today's sum is less than the previous day's. When the sums are equal, the existing trend
produces continuous intra-day changes in price reflecting buying and selling pressure.
The KO quantifies the difference between the number of shares being accumulated and distributed
each day as "volume force". A strong, rising force should accompany an uptrend and then
gradually contract over time during the latter stages of the uptrend and the early stages of
the following downtrend. This should be followed by a rising force reflecting some
accumulation before a bottom develops.
This script to change bars colors.