This implies that prices declined with relative ease and there was little or no buying pressure. This means prices advanced with relative ease and there was little or no selling pressure. The chart below shows Jabil Circuit (JBL) with the 14-period Ease of Movement indicator. This is just a 14-period simple moving average of each period’s EMV value. Developed by Richard Arms, Ease of Movement (EMV) is a volume-based oscillator that fluctuates above and below the zero line.
- A divergence happens when the price of an asset is moving in the opposite direction of the indicator.
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- Ease of Movement takes EquiVolume to the next level by quantifying the price/volume relationship and showing the results as an oscillator.
- This simple scan searches for stocks where the EMV crossed from positive territory to negative territory.
EMV began to improve before this breakout and was firmly positive at the time of the breakout. RSI also confirmed with a break above its April high and a move above 55. As an oscillator, the ease of movement indicator is usually shown as a line that moves up and down. Indeed, when applied in a chart, the indicator usually looks like the momentum indicator, which we have covered before. The example below shows the Nasdaq 100 ETF (QQQ) with the 1-period EMV in the lower indicator window. I am using EquiVolume bars because these show only the high-low range for the given period.
What is the ease of movement (EOM) indicator?
The Ease of Movement indicator shows the relationship between volume and price change. As with Equivolume charting, this indicator shows how much volume is required to move prices. It is one of those indicators that uses volume to provide guidance about the market. However, as mentioned, it is often useful among position traders who buy and hold financial assets for a long time. Ease of Movement (EMV) can be found in the “indicators” section under the chart. Users can adjust the settings by changing the numbers in the “parameters” box.
A technical momentum indicator that can help illustrate the relationship between the rate of
an asset’s price change and its volume. This indicator attempts to identify the amount of
volume required to move prices. Generally a value greater than zero is an indication that the
stock is being accumulated (bought) and negative values are used to signal increased
selling pressure. Strong negative
numbers indicate that price is moving downward on low volume. This is because the trader does not want to be caught off guard by a sudden change in price.
Note that volume is divided by 100,000,000 to keep it relevant with the other numbers. Theoretically, if prices move easily, they will continue to do so for a period of time that can be traded effectively. Ltd. does not solicit investors or market services in jurisdictions such as China and other countries.
Pros of the ease of movement indicator
Ideally, a buying opportunity usually emerges when the ease of movement indicator has moved substantially below the neutral line. In this situation, the price of the asset is usually said to be extremely oversold. In this case, you should buy the asset and continue holding it so long as the EOM indicator is rising. You calculate this distance by comparing the present period’s midpoint with the previous period’s midpoint.
When the EOM indicator is above the neutral line, it means that the asset is advancing with ease.
Understanding the Ease of Movement Indicator
Prior to the bearish breakdown, EMV deteriorated for two months and dipped into negative territory in March. With the stock rising and EMV declining in January-February, the advance was becoming more laborious (difficult). MOS broke support with a decline in early April and EMV confirmed with another dip into negative territory. After negative readings for most of April and May, EMV improved from late May to early June with a move into positive territory. The stock also formed a small inverse head-and-shoulders and broke resistance at 50.
Account access and trade execution may be affected by factors such as market volatility. This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success.
How to read the EOM indicator
Chartists can use EMV to confirm a breakout on the price chart or a bullish indicator signal. Conversely, a move into negative territory can be used to confirm a breakdown on the price chart or a bearish indicator signal. Most traders use EMV in conjunction with other forms of technical analysis, including both technical indicators and chart patterns, to improve their chances of success. Some analysts prefer to add a moving average to the EMV line and use it as a trigger line to generate trading signals. Traders may also look for divergences and convergences between the Ease of Movement and price as a signal of upcoming reversals.
The blue arrows show two small EMV values, one slightly positive and the other slightly negative. Volume on both days was above average, but the high-low range was modest or even small. This means prices had difficulty moving even though volume was relatively high.
Day Trade the World Staff
If prices are not moving, or if heavy volume is required to move prices, then the indicator will also be near zero. Further, some day traders use the ease of movement indicator to find divergences. A divergence happens when the price of an asset is moving in the opposite direction of the indicator.