Accumulation/Distribution Line

Overview

Accumulation/Distribution is a momentum indicator that associates changes in price and volume. The rationale is that the more volume that accompanies a price move, the more significant the price move (Achelis 1995). As one may suspect, Accumulation/Distribution is a variation of the more popular OBV.

How It Is Calculated

A portion of each trading day's volume is added or subtracted from a cumulative total. The nearer the closing price is to the intraday high, the more volume is added to the cumulative total. In contrast, the nearer the closing price is to the intraday low, the more volume is subtracted to the cumulative total. If the close is exactly between the intraday high and low, nothing is added to the cumulative total.

How To interpret

Divergence analysis

When Accumulation/Distribution line moves up, it means the stock is being accumulated (bought). On the other hand, when it moves down, it shows that the stock is being distributed (sold).

Divergences between Accumulation/Distribution and price imply a change is imminent. If Accumulation/Distribution moves up and price moves down, prices will probably reverse. The same logic applies when Accumulation/Distribution moves down and prices moves up.

Example

When China Petro corrected to a new high on 14 July 2005, Accumulation/Distribution line was in a falling trend. Shortly afterwards, prices reversed its direction to a downward movement.

Rules available in ChartNexus

Acc/Dis Divergence With Price

• Acc/Dis is increasing with price still moving down
• Acc/Dis is decreasing with price still moving up

Parameters available:

• Max Divergence Days - the maximum number of days during which the divergence occurs
• Min Divergence Days - the minimum number of days during which the divergence occurs
• Min Overlap Length - the minimum number of overlapping days during which price and Acc/Dis diverge
• Price Slope - the minimum slope of the moving average of the price
• Acc/Dis Slope - the minimum slope of the moving average of Acc/Dis
• Price MA Period - the number of days used for the period of the moving average of the price
• Acc/Dis MA Period - the number of days used for the period of the moving average of the Acc/Dis
• Acc/Dis On Right - if value is set to 1), only divergences with Acc/Dis slope on the right side of price slope are triggered

Acc/Dis Convergence With Price

• Acc/Dis is increasing with price moving up
• Acc/Dis is decreasing with price moving down

Parameters available:

• Max Convergence Days - the maximum number of days during which the convergence occurs
• Min Convergence Days - the minimum number of days during which the convergence occurs
• Min Overlap Length - the minimum number of overlapping days during which price and Acc/Dis converge
• Price Slope - the minimum slope of the moving average of the price)
• Acc/Dis Slope - the minimum slope of the moving average of Acc/Dis)
• Price MA Period - the number of days used for the period of the moving average of the price
• Acc/Dis MA Period - the number of days used for the period of the moving average of the Acc/Dis
• Acc/Dis On Right - if value is set to 1, only convergences with Acc/Dis slope on the right side of price slope are triggered

Acc/Dis Trend

• Acc/Dis is trending upwards
• Acc/Dis is trending downwards

Parameters available:

• t - the number of days that Acc/Dis has been trending
• Slope - the slope of the Acc/Dis when it is trending

References:

• Achelis, S. B., Technical Analysis from A to Z, 1995