The Aroon oscillator is the numerical value of the difference between the Aroon up line and the Aroon down line. The oscillator is determined by subtracting the down line from the up line to find a recordable numerical result between -100 and 100.
The centerline of the Aroon oscillator, or zero, is the dividing line that determines the direction of the trend. The higher the number is from zero on the Aroon oscillator, the greater the security’s upward strength. Conversely, the lower the oscillator’s value, the lesser the security’s strength tends to be.
Predicting Trend Reversals with the Aroon Oscillator
A trend reversal, positive or negative, is recognized whenever the Aroon oscillator value crosses through the centerline. Most technical traders use the Aroon oscillator in conjunction with divergence to better predict trend reversals. When the oscillator moves in one direction and the price trend in another, it is a good warning signal that the trend is reversing.
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