Intraday Momentum Index (IMI)

What Is the Intraday Momentum Index (IMI)?

The Intraday Momentum Index (IMI), is a technical indicator that joins parts of candlestick analysis with the relative strength index (RSI) to produce overbought or oversold signals.

The intraday indicator was developed by market technician Tushar Chande to aid investors with their trading choices.

Understanding the Intraday Momentum Index (IMI)

Investors use technical indicators to estimate when a security, like a stock, ought to be bought or sold. Technical analysis, which utilizes technical indicators, inspects the relationship between a security's price and volume over differed periods of time. Indicators, for example, the relative strength index and Bollinger bands, try to create buy and sell signals without inspecting a security's fundamentals. In that capacity, they are generally viewed as more valuable for short-term traders than long-term investors.

The IMI takes a gander at the relationship between a security's open and close price throughout the day, instead of how the open/close price fluctuates between days. It consolidates a few highlights of the relative strength index, specifically the relationship between "up closes" and "down closes" and whether there is an indication that a stock is overbought or oversold, with candlestick charts. Candlestick charts for a given day contain a "real body" highlighting the gap between the open and close endlessly price points over the high and low called upper and lower shadows.

Technical analysts can utilize the IMI to guess when a security is overbought or oversold.

The Formula for IMI

$\begin &\text = \left ( \frac{ \sum_ \text }{ \sum_ \text + \sum_^ \text } \right ) \times 100 \ &\textbf \ &\text = \text - \text{OP, on Up Days -- i.e. Close} > \text \ &\text = \text \ &\text = \text \ &\text = \text - \text{CP, on Down Days -- i.e. Open} < \text \ &d = \text \ &n = \text{Number of days (14 is typical)} \ \end$
The IMI is calculated as the sum of gains on up days separated by the sum of gains on up days plus the sum of losses on down days. This is then duplicated by 100. In the event that the subsequent number is greater than 70, the security is considered overbought, while a perusing of under 30 demonstrates that a security is oversold. The investor will take a gander at the IMI over a period of days, with 14 days being the most common time period to check out.

Model Using the Intraday Momentum Index

We should investigate the Intraday Momentum Index applied to the SPDR S&P 500 ETF (SPY):

The chart above demonstrates the way that oversold or overbought IMI readings can create buy and sell trade signals on a famous index. While these signs aren't generally accurate, they might give a greater degree of precision than just utilizing the RSI. Numerous traders join these experiences with different forms of technical analysis to maximize their possibilities of a fruitful trade. For instance, they might search for oversold conditions and a breakout from a chart pattern before going into a long position.

Highlights

• The IMI takes a gander at the relationship between a security's open and close price throughout the day, instead of how the open/close price changes between days.
• The Intraday Momentum Index (IMI) produces trading signals utilizing relative strength (RSI) related to candlestick charting.
• Technical analysts can utilize the IMI to guess when a security is overbought or oversold.