The Moving Average ATR Extension Indicator offers a powerful blend of two key market elements: the Average True Range (ATR) and Moving Averages (MA), capturing the dynamics of market momentum and trend direction.
This indicator is used to measure market extension from a user-selected moving average based on multiples of the Average True Range (ATR). By doing this, it becomes remarkably straightforward to spot strength at breakout points or exhaustion near the end of a run.
As a market breaks out the extension indicates a surge in buying pressure, while an extension after a sizeable move can often be an indication of market exhaustion. This extended position essentially reflects over-enthusiastic buying and could be an early warning sign of a potential trend reversal.
Breakout Strength:
Exhaustion:
Give this indicator a BOOST and COMMENT your thoughts!
Hi, I get how this will show extension in terms of # of ATR above MA, but How does this measure breakout strength?
QuantVue
⋅
@bpthomas22, When a strong breakout occurs, stocks will often extend a few ATR from the mean showing real buying demand. It doesn’t happen with every break out, but could be a signal you have a very strong breakout if it does.