Name, Sometimes Called:
Klinger Volume Oscillator
Also known as Klinger Oscillator
Sometimes abbreviated KVO or KO
Klinger is sometimes misspelled as Klingler.
Brief Description:
The Klinger Oscillator is a volume- and price-based
oscillator intended to measure both short- and long-term money flows
into and out of a security.
Definitions, Formulas:
Developed by Stephen J. Klinger to help in both short-
and long-term analysis, the Klinger Volume Oscillator measures trends
of money flows based on volume.
The KVO is derived from three types of data: the high-low price
range, volume, and
accumulation
/distribution.
Determining KVO begins with calculating the so-called “typical”
price (TP) for today and yesterday:
TPTODAY = (HTODAY
+ LTODAY + CTODAY)
/ 3
TPYESTERDAY = (HYESTERDAY
+ LYESTERDAY + CYESTERDAY)
/ 3
where
H = High, L = Low, and C = Close, respectively
Based on the TP values, assign a signed value (SV) to today’s
volume (V):
If TPTODAY > TPYESTERDAY,
then SV = +V
If TPTODAY < TPYESTERDAY,
then SV = -V
In our research, we found no statement as to how to treat the case
TPTODAY = TPYESTERDAY
So for equal TP values, SV=+V. That is, we treat this case as positive.
Klinger refers to the signed volume value SV as the “volume
force.” A positive volume force indicates accumulation,
while a negative volume force indicates distribution.
Next, calculate two EMAs of the signed volume value and their difference:
KVO = EMA(34)(SV) - EMA(55)(SV)
Finally, calculate a 13-period EMA of the KVO, used as a trigger
line for the KVO:
EMA(13)(KVO)
Note that the KVO TAI can also be used during divergence from price
trends.
If KVO is rising and price is declining, this is a bullish divergence.
When KVO crosses over zero, expect a price increase.
If KVO is declining and price is rising, this is a bearish divergence.
When KVO crosses under zero, expect a price decline.
For our purposes, we use only using the crossover form, not the
divergence form, of KVO.
Positive Development Calculation:
For this TAI, a new positive development (NPD)
occurs when the KVO crosses above the 13-period EMA of KVO (the
trigger line). That is, KVO x+ EMA(13)(KVO).
This TAI is no longer positive when the KVO crosses under the 13-period
EMA of KVO (the trigger line) That is, KVO x- EMA(13)(KVO).
If this TAI is still positive tomorrow, it will no longer be new,
but will be a cumulative positive development (CPD).
If this TAI was a new positive development (NPD)
yesterday, and is still positive today, then it becomes a cumulative
positive development (CPD).
History:
Developed by Stephen I. Klinger, the KVO appeared in
an article in (Technical Analysis of) Stocks and Commodities
magazine (December 1997). An excerpt from the article appears at
http://www.traders.com/Documentation/FEEDbk_docs/Archive/1297/
Abstracts_new/Klinger9712/Kinger.html
The full article is available for purchase here:
http://store.yahoo.com/traderscom/-v15-c12-identif-pdf.html
Profiting from earlier research on volume by such well-known technicians
as Joseph Granville, Larry Williams, and Marc Chaikin, Klinger set
out to develop a volume-based indicator to aid both short- and long-term
analyses.
The KVO was developed with two apparently opposing goals in mind:
to be sensitive enough to signal short-term tops
and bottoms,
yet accurate enough to reflect the long-term flow of money into
and out of a security.
The values 13, 34, and 55 (the periods of the three EMAs used in
the KVO) are numbers from the Fibonacci sequence where each number
is the sum of the previous two numbers:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144...
As to why those specific values were chosen, we leave that explanation
to Mr. Klinger.
The chart below shows the Klinger Oscillator indicator in action.
Notice the volatility of the signals and the potential for damaging
whipsaws.
Shown are three times between February and June 2005 where KVO predicted
a price rise. Notice the whipsaw in May 2005.
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