Intraday Momentum Index (IMI)

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Intraday Momentum Index (IMI)

The Intraday Momentum Index (IMI) is a short-term technical indicator that blends candlestick analysis with the relative strength index (RSI) concept to identify overbought and oversold conditions within trading days. Developed by Tushar Chande, the IMI measures the relationship between a security’s intraday open and close prices over a chosen lookback period.

How it works

Instead of comparing closes from one day to the next (like RSI), the IMI compares each day’s close to its open:
– On up days (close > open) it records the intraday gain (close − open).
– On down days (open > close) it records the intraday loss (open − close).

By summing gains and losses over the lookback period, the IMI expresses intraday momentum as a percentage, indicating whether recent intraday moves have been dominated by buying or selling.

Formula

IMI = (Sum of Gains / (Sum of Gains + Sum of Losses)) × 100

Where:
– Gains = Close − Open on up days (Close > Open)
– Losses = Open − Close on down days (Open > Close)
– Lookback period n is commonly 14 days

Interpretation

  • IMI > 70: typically considered overbought (potential sell signal)
  • IMI < 30: typically considered oversold (potential buy signal)
  • Values between 30 and 70 indicate neutral intraday momentum

Some traders use stricter thresholds (e.g., 80/20) for higher-confidence signals.

Example use

Applied to an index or ETF (e.g., SPY), IMI extremes can highlight short-term overbought or oversold episodes. Traders often look for:
– Oversold IMI readings as potential entries for long trades, especially when price shows a breakout or support confirmation.
– Overbought IMI readings as potential exits or short setups, especially if accompanied by resistance or bearish price patterns.

Practical tips and limitations

  • IMI is best suited to short-term and intraday trading; it ignores fundamentals and longer-term context.
  • It incorporates candlestick information (open vs. close) and can be more sensitive to intraday price action than standard RSI.
  • False signals can occur in strong trending markets; a persistent uptrend can keep IMI elevated and a downtrend can keep it depressed.
  • Combine IMI with other tools—trend analysis, volume, support/resistance, chart patterns, or additional indicators—to filter signals and improve decision-making.
  • Use the same lookback period consistently (14 is standard) and backtest threshold choices for the specific security and timeframe you trade.

Conclusion

The Intraday Momentum Index is a concise way to gauge short-term buying and selling pressure by using intraday open/close relationships. When used with complementary analysis and appropriate risk management, IMI can help traders time entries and exits within short horizons.