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Overbought or Oversold? Check Distance From MA

Moving averages are one of the most basic tools for technical analysts. They can be useful for both trend analysis and for mean reversion.

But how can you know when price is historically overbought or oversold relative to a moving average? Distance from MA can help.

This indicator calculates the distance from a moving average as a percentage and plots the result as an oscillator. Values above 0 appear in green, while negative readings are colored red.

This chart highlights the depth of the S&P 500's recent selloff. As you can see, the close dipped to 25 percent below its 50-day SMA on Monday. That was its most oversold condition since November 20, 2008 -- in the middle of the subprime financial crisis.

Distance from MA can handle five types of moving average. Simply change the "AvgType" input according to this key:

1 - Simple Moving Average

2 - Exponential Moving Average

3 - Hull Moving Average

4 - Weighted Moving Average

5 - Volume-Weighted Moving Average
Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

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Comments

thanks, can u add a midline at zero??
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Very good analysis , thanks for sharing
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