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In short, the Chaikin Oscillator measures the momentum of the Accumulation Distribution Line. Developed by Marc Chaikin, this indicator applies the MACD formula to the Accumulation Distribution Line, which makes it an indicator of an indicator. The Chaikin Oscillator is the difference between the 3-day EMA of the Accumulation Distribution Line and the 10-day EMA of the Accumulation Distribution Line. The indicator is positive when the 3-day EMA is above the 10-day EMA and negative otherwise.
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Like other momentum indicators, this indicator is designed to anticipate directional changes in the Accumulation Distribution Line by measuring the momentum behind the movements. A momentum change is the first step to a trend change. Anticipating trend changes in the Accumulation Distribution Line can help chartists anticipate trend changes in the underlying security. On the chart above, the Accumulation Distribution Line hit a new high this week, but the Chaikin Oscillator has been moving lower since the second week of February. Upside momentum is waning, but the Accumulation Distribution Line has yet to actually break down. You can read more on these indicators in our ChartSchool.
