What does the Intraday Momentum Index (IMI) stand for?
The Intraday Momentum Index (IMI) is a technical indicator that uses pattern analysis and the relative strength index (RSI) to show when a price is too high or too low.
Developer Tushar Chande, a market technician, made the intraday indicator to help traders make choices.
How to Read the Intraday Momentum Index (IMI)
Technical indicators help investors determine when to buy or sell an investment, like a stock. With the help of technical indicators, technical analysis looks at how the price and volume of an investment have changed over time. Some indicators, like the relative strength index and Bollinger bands, try to find buy and sell signs without looking at security basics. Because of this, they are thought to be better for short-term traders than long-term buyers.
It is not how the open/close price changes from day to day that the IMI looks at but how the open/close price fluctuates during the day. It takes parts of the relative strength index and adds candlestick charts to show things like the link between “up closes” and “down closes” and whether there are signs that a stock is overbought or oversold. A “real body” on a candlestick chart for each day shows the difference between the open price and the close price. There are also “upper and lower shadows,” price points above the high and low.
The IMI can help technical experts determine when a security has been bought or sold too much.
How to Figure Out IMI
To find the IMI, divide the total amount of gains on days when the market went up by the total amount of gains on days when the market went down. This is then turned into a hundred. If the number that comes up is more than 70, the security has been bought too much. The security has been sold too much if the number is less than 30. From one day to another, the investor will look at the IMI. Fourteen days is the most usual amount of time.
Using the Intraday Momentum Index as an Example
Now let us look at how the Intraday Momentum Index works with the SPDR S&P 500 ETF (SPY):
The above graph displays how IMI readings that are too low or high can create buy and sell signs for a well-known index. Even though these signs aren’t always right, they might be more accurate than just using the RSI. Many traders use these ideas along with other types of fundamental analysis to improve their chances of making a profit. Before going long, they might, for example, wait for oversold conditions and a break out from a chart trend.
Conclusion
Using relative strength (RSI) and candlestick charts, the Intraday Momentum Index (IMI) sends out trading cues.
It is not how the open/close price changes daily that the IMI looks at but how the open/close price fluctuates during the day.
The IMI can help technical experts determine when a security has been bought or sold too much.
