Awesome Oscillator (AO) measures the difference between the 5 and 34 period simple moving averages applies to the median prices. The AO oscillator is a versatile oscillator as it can be traded on its own. It merely represents the difference of values between a 5 and 34 period moving averages.
The AO indicator oscillators above and below the 0-line and is plotted as a histogram.
A buy signal or a sell signal is triggered when the AO rises above the 0-line or falls below it. Similar to the AC indicator, the AO indicator also signals early warnings, especially seen when the AO is below the 0-line as the AO bars turn green or AO printing red bars while it is still above the 0-line.
The Awesome oscillator also has some other distinctive signals besides just the 0-line crossovers.
Saucer signals are the more common type of signal which is generated when the AO indicator changes from red to green while it is still above the 0-line and the second bar is lower than the first. The third AO bar has to be higher than the second bar and green in order to trigger a buy signal.
Likewise, when the AO is below the 0-line, the second AO bar has to be lower than the previous bar and turn from green to red. The next, third bar has to be red and lower than the previous red bar to qualify a saucer sell signal.