Bull / Bear Power

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Bull / Bear Power

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The Bull / Bear Power oscillator was developed by Alexander Elder. It determines the strength of buyers (bulls) vs. sellers (bears) as it measures the difference between the highest price and a 13-period EMA, plotted as a histogram.

If the Bull Power indicator is above zero (High > EMA), it means buyers were able to keep the highest price above the EMA.  This is positive. Buy signal is generated when the Bulls Power oscillator moves above zero.  If the Bull Power indicator is below zero (High < EMA), it means sellers were able to drive price below the EMA.  This is negative.

If the Bears Power indicator (Low – EMA) is below zero, it means sellers were able to drive price below the EMA.  If the Bears Power indicator is above zero, it means buyers were able to keep the lowest price above the EMA.  Bears Power is a fully unbounced oscillator with a base value of 0 and has no lower or upper limit.

Divergences between bull or bear power and prices indicate the best trading opportunities. This indicator is used together with a trend indicator (mostly Moving Average):

  • if trend indicator is down-directed and the Bulls Power index is above zero, but falling, it is a signal to sell;
  • it is desirable that, in this case, the divergence of peaks were being formed in the indicator chart. (https://www.metatrader5.com/en/terminal/help/indicators/oscillators/bulls)
  • If trend indicator is up-directed and the Bears Power index is below zero, but growing, it is a signal to buy;
  • it is desirable that, in this case, the divergence of bases were being formed in the indicator chart. https://www.metatrader5.com/en/terminal/help/indicators/oscillators/bears
  • There are some very specific conditions you need to look for when using the Elder-ray in making buying/selling and shorting/covering decisions.
    • Here are the conditions essential for buying:
      • The trend is up as indicated by EMA.
      • Bear power is negative but rising.
    • There are two additional conditions fine-tune the buying decision:
      • Bull power’s latest peak is higher than it was previously.
      • Bear power is moving higher from a bullish divergence. This situation provides traders with the strongest buy signal.
    • The corresponding sell signal is realized when prices hit a new high but bull power reaches a lower peak than that of its previous rally. For shorting, two conditions are absolutely necessary:
      • The trend is down as indicated by EMA.
      • Bull power is positive but falling.
    • Two additional conditions provide a stronger signal for shorting, but they are not absolutely essential:
      • Bear power’s latest bottom is deeper than any previous bottom.
      • Bull power is declining from a bearish divergence. As in the case of buying, the strongest signals for shorting are rendered by bearish divergences between bull power and prices.
    • In deciding when to cover short positions, it is important to interpret the time at which bear power indicates the weakness or strength of bears. A new low in price with a new low in bear power points to a continued downtrend; however, with bear power tracing a shallower bottom than prices, a bullish divergence is realized: cover your shorts and prepare for the ensuing uptrend.