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Ultimate Oscillator (UO)

This oscillator was created by Larry Williams. It is the Weighted Moving Average of three different periods. Capturing the momentum of three different time frames means it is less prone to react to volatility and creates less false signals. The value of the UO ranges from 0 to 100.

Example

Interpretation

The Oversold level is 70. And the Overbought level 30

A Buy Signal is shown when:
The UO has to fall below the oversold level of 30, while the price forms a low.
Then the UO has to rise above 50 and create a higher low, while the price forms a lower low.
If price then breaks it's resistance line it is considered a price breakout. A Bullish Signal.

A Sell Signal is shown when:
The UO has to rise above the overbought level of 70, while the price forms a high.
Then the UO has to rise to a lower high, while the price forms a higher high.
If price then breaks it's support line it is considered a price breakout. A Bearish Signal.

Calculation

Buing Pressure = Close - Minimum(Low or Prior Close).

True Range = Maximum(High or Prior Close) - Minimum(Low or Prior Close)

Average7 = (7-period Buying Pressure Sum) / (7-period True Range Sum)
Average14 = (14-period Buying Pressure Sum) / (14-period True Range Sum)
Average28 = (28-period Buying Pressure Sum) / (28-period True Range Sum)

Ultimate Oscillator = 100 x [(4 x Average7)+(2 x Average14)+Average28]/(4+2+1)

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