The mass index serves for finding turns in trends. It is
based on changes between maximum and minimum prices. If the
amplitude gets wider, the mass index grows; if it gets narrower,
the index gets smaller. The mass index was created by Donald Dorcy.
According to D.Dorcy, the most important mass index signal
is a special model formed by the indicator. It is called
"reversal bulge". It is formed when a 25-period mass index
first rises above 27 and then falls below 26,5. In this case
a turn of prices can take place, independently of the general
trend (the prices may move up or down or fluctuate within a trade corridor).
To find out which signal — for purchase or for sale — the reverse bulge
gives, people often use 9-period exponential moving average of prices. When a reverse
bulge appears, you should buy if the moving average falls (in hope of a turn) and
sell if it grows.
Technical Indicators
