Spotting Consolidations With the Aroon Indicator
The Aroon indicator measures trends, but can also be used to spot consolidations. When both Aroon levels are low (below 30 in this case) it means that the stock has not made a new short term high or low in a while. Therefor it is trading in a price range and it could be an interesting trade when it breaks out of this range.
The Aroon Screening Capabilities and How To Use this Indicator in a Trading Strategy
In this follow-up article I will elaborate on the screening possibilities in the ChartMill platform. Furthermore I will use an example setup to describe how this indicator can make a practical contribution in a trading strategy.
Understanding the Aroon Indicator
The Aroon-indicator is used to discover and anticipate new potential trends early on, identify sideways markets but also to visualize correction periods within existing trends. It is a very versatile indicator but it takes some practice to learn to interp
Aroon: Aroon up Below 30
Low Aroon indicator levels
Volatility: ATR(20)% Above 1
Minimum volatility to avoid dead stocks
Aroon: Aroon down Below 30
Low Aroon indicator levels
Price: Above 20
To avoid low priced stocks
Average Volume: 50 SMA > 300K
Minimal liquidity
Aroon indicator
Regional Run
Run this screen in your favorite region. You can always further fine tune the screen by changing the general settings after it opened in the screener.