ADX Values
As mentioned in the Directional Movement Section, ADX
Values can range from 0 to 100, but values below 12 or above 50 are quite rare.
Below is a graph showing the distribution of all ADX Values in our database
across all stocks and dates.
The ADX Value of 23 is the median figure. In other words, half the distribution
is contained in the values of 0-23 and the other half of the distribution is
24 and above. ADX Values less than 12 and greater than 50 each account for
about 2.5% of the distribution.
On those rare occasions when a stock acquires an ADX Value above 50, its
momentum is overheating and has a good chance of reversing its direction or
stalling. Our stock screens called Bungee Jumpers
and Gravity Defiers present these overheated stocks.
Stocks with an ADX Value of under 12 have a generally trendless, directionless,
usually sideways price movement, and something explosive can be expected
to happen soon, either to the upside or the downside. We call these stocks
Coiled Springs.
Another signal that something big is going to happen occurs when the ADX Line
falls below the +DI and -DI Lines. The longer it stays there, quietly waiting,
the stronger the base for the next move, which is usually major. We call these
stocks Jack-In-The-Boxes.
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