20-Day Moving Minimum and Maximum

What is it:

The 20-day moving minimum and maximum is a range tool that measures the highest highs and the lowest lows in the past 20 days of trading. Similar to the Bollinger Band, this technical tool signals a bullish trend when prices approach the ceiling and bearish when prices approach the floor. The size of the range describes the momentum of the movement in the market. When prices push the ceiling higher and the floor remains at a certain point, the stock is growing to new highs without establishing any new lows. In the same way, a downturn in prices is defined by lower floors and a stable ceiling. After the momentum dies down, the range squeezes as the stock price consolidates and prepares for a new trend.

How to use it:

The 20-day moving minimum and maximum tracks the momentum of the current trade by showing how the price has set higher highs or set lower lows. The indicator can be paired with a metric measuring volume in order to track the strength of new ceilings and new floors. The length measured of the indicator can be adjusted for short-term, intermediate-term, or long-term analysis. The 20-day time length accurately indicates the strength of a trend that has occurred over the past couple of weeks. As far as signals go, a buy signal could be generated by a widening of the range and a sell signal by a shrinking range.

Download the template here. Historical price data are available at Yahoo Finance for the security of your choice. A sample chart is shown below using  Exxon-Mobil (XOM).

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