Awesome Oscillator

The awesome oscillator, from Bill Williams, is a momentum histogram of the midpoint, not of the close. It is a 5-versus-34 moving-average crossover expressed as bars around zero. Green and red bars, in the usual colouring, mark whether the histogram rose or fell versus the prior bar, not whether it is positive. Positive values mean the short midpoint average is above the long one.

Williams built patterns on the histogram: a saucer, a cross of zero, and two peaks. The zero cross is the one that maps cleanly to other tools. It is a moving-average cross of midpoints. The saucer and twin-peaks rules are extra pattern language on the same series. They do not add new data.

A cross from negative to positive says the short midpoint average has overtaken the long one. That is a bullish momentum regime on this setting. A second histogram peak that is lower, while still above zero, was Williams's warning of fading momentum. Confirm it with price.

A cross from positive to negative is the bearish regime. Twin peaks below zero, the second trough shallower, was the bullish divergence version in his method. Again, price has to agree. The histogram will print the pattern often.

Reading bar colour as trend direction. A red bar above zero is a smaller positive reading, still a positive regime. Also using AO and a 5/34 MACD as two indicators. They are close relatives.

Fixed 5 and 34 will not suit every market, and changing them means you are no longer trading Williams's tool. Either accept the defaults or stop calling the variant the awesome oscillator.