Stocks & Commodities V. 30:5 (12-17): Sentiment Zone Oscillator by Walid Khalil, MFTA, CFTe

Stocks & Commodities V. 30:5 (12-17): Sentiment Zone Oscillator by Walid Khalil, MFTA, CFTe
Item# 300KHALPDF
Availability: In Stock

Product Description

Sentiment Zone Oscillator by Walid Khalil, MFTA, CFTe

Here’s an indicator that measures extreme bullishness and bearishness and helps you identify a change in sentiment.

After developing the volume zone oscillator (VZO) and price zone oscillator (PZO), I found there were sides of the market not covered by those two oscillators — namely, time and sentiment. Sometimes, the market could reverse from a point with attractive price and volume indicators, but by then the sentiment could be be too high for the move to continue.

The psychology of that extreme sentiment point is best described in John Murphy’s Technical Analysis Of The Financial Markets, where he states that the more bullish the forecast, the more aggressively the trader will approach the market.


The sentiment zone oscillator (SZO) is a leading contrary oscillator that measures the extreme emotions of a single market or share. It measures and defines both extremes, bullishness (overoptimism) and bearishness (overpessimism), that could lead to a change in sentiment, eventually changing the trend of the time frame under study.

The SZO was devised on the belief that after several waves of rising prices, investors begin to get bullish on the stock with increasing confidence since the price has been rising for some time. The SZO measures that bullishness/bearishness and marks overbought/oversold levels.


The SZO formula is based on the number of rising days to declining ones. It only uses the closing price as a separation rule.

To include both time and sentiment, a value of +1 is stored for each higher close above the previous period closes. Otherwise, a value of ‑1 is stored. With that calculation method, the time is covered and categorized bullish or bearish. In addition, a positive or a negative value serves the sentiment condition.

For smoothing purposes, a triple exponential moving average (TEMA) of those plus and minus values is divided by the total number of days of the period being studied:

Sentiment zone oscillator = 100 * (SP ÷ Range)


SP (sentiment position) = X-days TEMA (number of up days minus number of down days) Range = Period being studied

The AmiBroker and MetaStock formulas for calculating the SZO are shown in the sidebar “Calculating SZO.”

*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at users can view the S&C Digital Edition in the subscriber's section on

Take Control of Your Trading.
Professional Traders' Starter Kit
All these items shown below only $299.99!
  • 5-year subscription to Technical Analysis of STOCKS & COMMODITIES, The Traders' magazine. (Shipping outside the US is extra. Washington state addresses require sales tax based on your locale.)
  • 5 year access to S&C Archive
  • 5 year access to S&C Digital Edition
  • 5-year subscription to Advantage.
  • 5-year subscription to Working Money.
  • Free book selection.
  • Click Here to Order