Aroon Indicatorhe Aroon Indicator was developed by Tushar Chande. Its comprised of two plots one measuring the number of periods since the most recent x-period high (Aroon Up) and the other measuring the number of periods since the most recent x-period low (Aroon Down). The plotted value is on a "stochastic" like scale ranging from 0 to 100. So, for example, if in a time-period of 14 days a security makes a new 14-day high, the Aroon Up = 100. When the security makes a new 14-day low, the Aroon Down = 100. When the security has not made a new high for 14 days, the Aroon Up = 0 and when the security has not made a new low for 14 days, the Aroon Down = 0.
When the Aroon Up line reaches 100 it is a sign of strength. If the Aroon Up persists between 70 and 100, a new uptrend is indicated. Likewise if the Aroon Down line falls to 100, potential weakness is indicated. If the Aroon Down remains persistently between 70 and 100, a new downtrend is indicated. A strong uptrend is indicated when the Aroon Up line persistently remains between 70 and 100 while the Aroon Down line persistently remains between 0 and 30. Likewise a strong downtrend is indicated when the Aroon Down line persistently remains between 70 and 100 while the Aroon Up line persistently remains between 0 and 30.
When the Aroon Down line rises above the Aroon Up line, potential weakness is indicated and expect prices to begin trending lower. When the Aroon Up line crosses the Aroon Down line, potential strength is indicated and prices should begin to trend higher.
When the Aroon Up and Aroon Down Lines move parallel with each other then consolidation is indicated. Expect further consolidation until a directional move is indicated either by an extreme level or a crossover.
Aroon is a Sanskrit word meaning "dawn's early light" or the change from night to day.
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