It is a momentum oscillator developed by Gene Quong and Avrum Soudack.
It combines both price and volume. It measures the strength of money flowing in and flowing out of a financial instrument over a period.
There are two general interpretations:
- Overbought/Oversold: A reading above 80 is considered Overbought and a market top may be in place. A reading below 20 is considered oversold and a market bottom may be imminent.
- Divergence between the oscillator and price hints at reversals.