Intra VWAP Disparity Index

 

#intraday #volume #overextension 

The VWAP version of the Disparity Index: (Close – VWAP) / VWAP x 100. It shows in percentage terms how far price has stretched from the day’s volume-weighted average. Because it is a percentage, the same reading means the same stretch on any stock, at any price level. 

Default period: Anchored to the day’s start (intraday only) 

Reading above zero indicates price trading above VWAP. Reading below zero indicates price below VWAP. 

Extreme readings show an overstretched intraday move. 

Useful readings: 

Crossing above zero: Price reclaimed VWAP, intraday bullish shift 

Crossing below zero: Price lost VWAP, intraday bearish shift 

High positive reading versus the stock’s usual range: Stretched rally, chasing is risky 

Deep negative reading: Stretched fall, bounce toward VWAP likely 

Staying mildly positive all day: Steady trend day up 

Each stock has its own normal stretch; compare with its recent days 

Objective rules: 

Bullish: Disparity crosses above zero. 

Bearish: Disparity crosses below zero. 

Fade rule long: Reading at the low extreme of recent days AND a bullish reversal candle forms 

Fade rule short: Reading at the high extreme of recent days AND a bearish reversal candle forms 

No-chase rule: Avoid fresh entries when the reading is at the day’s extreme 

What makes it unique: 

It normalizes distance from VWAP into a percentage, so stretched means the same on any stock at any price. That comparability is what raw price-minus-VWAP lacks. 

The indicator table value in TradePoint & RZone also provides you with a list of all values of this indicator for any group of stocks. This will allow you to compare the readings of this indicator across different stocks.

This indicator is available in the System Builder on RZone & TradePoint for all charting methods. Using the system builder, you can develop various strategies based on the different conditions already present in this indicator. Additionally, it can be used with other indicators or price patterns to develop effective trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.

The indicator is applicable to all types of charting. It is calculated based on the number of columns on P&F charts, bricks on Renko charts, lines on Line-break charts, candles on Heikin-Ashi charts, and lines on Kagi charts. While the formula and reading of the indicators remain the same, they become more dynamic on these charts.