The Chaikin Oscillator was developed by Marc Chaikin to compare the price and the volume of a security. It is an oscillator indicator that uses the moving averages of the Accumulation/Distribution Line and is used to spot overbought and oversold signals.
The Chaikin Oscillator is the difference between a ten-day exponential moving average and a three-day exponential moving average of the Accumulation/Distribution Line. It is an indicator to predict changes in the Accumulation/Distribution Line. See Accumulation/Distribution Line for the computation.
When the oscillator is at a high value, the Accumulation/Distribution Line is at a low value which denotes the selling pressure is strong. On one hand, when the oscillator is at low value, the buying pressure is imminent. Thus, the oscillator helps technical analyst identifies upcoming reversals.
A divergence between the price and the volume signals a sudden market reversal.