Accumulation/Distribution Line
The Accumulation/Distribution Line is a cumulative momentum indicator that uses price and volume to determine whether money is flowing into or out of a stock. It is similar to On Balance Volume (OBV) but instead of adding or subtracting the day's volume if the stock is up or down, the Accumulation/Distribution Line adds or subtracts a percent of the day's volume based on where the stock closed in relation to it high and low.
If a stock closes very close to the high of day then most of the volume is added to the cumulative total. If a stock closes near its low, most of the volume is subtracted. This implies that if a stock consistently closes near its high on solid volume while having an occasional down day on weak volume, the Accumulation/Distribution Line will trend up with occasional small pullbacks.
Like many indicators, the Accumulation/Distribution Line ought to move in the direction of the underlying issue, and a divergence is a hint that reversal may be near.
