Although the U/D Ratio is a powerful indicator, it is actually the change or slope of this ratio that signals a change in the stock price trend. If the slope of the U/D Ratio over n periods is increasing, the price of the stock is increasing on greater volume. Even better, if the slope of the U/D Ratio changes from negative (downward sloping) to positive (upward sloping), then enough buying action is coming into the stock to reverse the downward trend in the ratio.
Presentation
Above is a Daily Candlestick Chart of Apple Computers (AAPL). The bold green line in the lower window pane represents the Up/Down Volume Ratio Slope as specified in the preferences below. A volume histogram for AAPL can be seen in the middle pane. The bold blue line in the top pane is a Moving Average overlaying the price data.
