Accumulation/Distribution Oil Technical Analysis & Accumulation/Distribution Oil Trading Signals

Developed by Marc Chaikin

This oil indicator is used to assess the cumulative flow of money into and out of a crude oil.

Originally used for stocks trading, when it comes to stocks trading "volume" is the amount of shares traded in a particular stock, this volume is a direct reflection of the money that is coming into and out of a stock.

The basic principle behind AD is that volume(or money flow) is a leading indicator of the crude crude oil trading price. (Volume precedes crude oil trading price).

Tick volume is the measure of crude crude oil trading price changes (ticks) received by a oil broker during a particular trading period/interval. tick volume is incorporated by many oil brokers in their charting software.

Interpretation

This volume indicator is used to determine if volume is increasing or decreasing as the crude crude oil trading price on a oil chart is rising or falling.

UpCrude Oil Trading Trend

If the crude crude oil trading price on a oil chart is rising then the Accumulation/Distribution should also be rising. This shows that the crude crude oil trading price move is being supported by volumes and the move upward has strength & is sustainable.

If on the other hand crude crude oil trading price is moving up and the volumes are not, the strength behind the move is reducing; this creates divergence between crude crude oil price and indicator and warns of a possible move in the opposite direction.

DownOil Trading Trend

If the crude crude oil trading price on a oil chart is falling then the AD should also be falling. This shows that the crude crude oil trading price move is being supported by volumes & the move downwards has strength behind it.

If on the other hand crude crude oil trading price is moving down and the volumes are not, the strength behind the move is reducing; this creates divergence between crude crude oil price and AD & warns of a possible move in the opposite direction.

Crude Oil Technical Analysis & How to Generate Oil Trading Signals

Shown Below is an example of a oil chart and the technical analysis explanation

From chart above we can separate the chart into three parts, part A, B & C.

A – Upwards oil trend line on chart as well as on the Accumulation/Distribution

B – Downwards oil trend line on chart as well as on the Accumulation/Distribution

C – Upwards oil trend line on chart as well as on the Accumulation/Distribution

As long as the crude crude oil price & the indicator are moving in the same direction then the crude crude oil price move has enough momentum to continue moving in that direction as shown above

Crude Oil Trend-line Break

From the above chart we can see that once the oil trend line on the AD was broken then the crude crude oil trading price oil trend line was also broken.

Looking at the chart below we have added vertical lines to represent the points where the oil trend lines were broken, both on the crude crude oil price chart and the indicator.

Comparing the oil trend lines on the indicator & the crude crude oil trading price those of the AD were broken before those of the chart. This is because volume always precedes crude crude oil trading price.

Crude Oil Trading Signals

Exit

Exit signals are generated when the oil trend line on the Accumulation/Distribution is broken. A oil trend line break on the indicator warns of a possible reversal.

Entry

Once the oil trend line on the AD is broken it warns of a possible reversal in the direction of the crude oil market.

However if we want to take a trade in the opposite direction it is always best to wait for a confirmation signal.

A confirmation signal is considered complete once both the indicator & the crude crude oil trading price breaks both their oil trend lines.

Entry Signal Generated by Oil Trend Reversal