Awesome Oscillator

Awesome Oscillator (AO)

The Awesome Oscillator, developed by Bill Williams, shows the market driving force at the current moment. It is a 5-period simple moving average of the median price of the bars, minus a 34-period simple moving average of the median price. The oscillator is drawn as a histogram around a zero line.

Signals to Buy

Saucer. The only buy signal that occurs while the histogram is above the zero line. The histogram turns from falling to rising: the second column is lower than the first one and is red, the third column is higher than the second one and is green. All columns must stay above the zero line.
Zero line crossing. The histogram moves from negative to positive values by crossing the zero line.
Twin peaks. The only buy signal that occurs while the histogram is below the zero line. It forms when there are two dips below zero and the second dip is higher (closer to zero) than the first one, followed by a green column. The histogram must not cross above zero between the two dips.

Signals to Sell

The sell signals mirror the buy signals:

Saucer below the zero line: the histogram turns from rising to falling (a green column followed by a red column), while all columns stay below zero.
Zero line crossing from positive to negative values.
Twin peaks above the zero line: two peaks above zero where the second peak is lower than the first one, followed by a red column.

Green columns are higher than the previous column, red columns are lower.

Calculation of Awesome Oscillator

MEDIAN PRICE = (HIGH + LOW) / 2
AO = SMA(MEDIAN PRICE, 5) - SMA(MEDIAN PRICE, 34)

Where:

MEDIAN PRICE is the middle of each bar;
SMA is a simple moving average.

A column is green when its value is higher than the previous column and red when it is lower.