PZ Lopez Pressure
The Lopez Pressure indicator anticipates price reversals analyzing bullish and bearish pressure in the market.
- A ratio of 50 means the market is balanced
- A ratio over 70 means the market is overbought
- A ratio below 30 means the market is oversold
- The red dotted line is the current ratio
- The blue line is the signal line
- The orange line is the main line
It has straightforward trading implications.
- Look for buying opportunities when the market is oversold
- Look for selling opportunities when the market is overbought
- If the signal line is above the main line the pressure is bullish
- If the signal line is below the main line the pressure is bearish
How is the indicator calculated?
The buying pressure is the sum of all the accumulation bars over a certain number of days, multiplied by the volume. The selling pressure is the sum of all of the distribution over the same number of bars, multiplied by the volume. The indicator ratio gives you a measure of the buying pressure as a percentage of the total activity, which value should fluctuate from 0 to 100. It implements two moving averages, fast and slow, to identify changes in pressure trends and look for trades accordingly.
Arturo López Pérez, private investor and speculator, software engineer and founder of Point Zero Trading Solutions.