Tushar Chande developed several popular technical indicators and oscillators, including the momentum trading tool that bears his name. The primary use of the Chande momentum oscillator is to identify overbought and oversold securities. This tool is not difficult to read and react to; its readings are bounded in a range between -100 and +100, allowing it to be interpreted much like the relative strength index (RSI). Momentum oscillators are not meant to act as standalone indicators; a strategy based solely on the Chande momentum oscillator would prove difficult to execute.
The Chande momentum oscillator has a base value of zero. Bullish signals are generated when the oscillator is positive, and bearish signals are generated when it is negative. Extremely overbought positions can be identified at high levels, such as +50, while extremely oversold positions might exist beyond -50. If this oscillator is complemented with another indicator (or even a moving average line based on the oscillator itself), you could reasonably use Chande's formula to place short positions on very high values and long positions when the values are very low.
Some traders use the Chande momentum oscillator to confirm possible trends, entering when the oscillator is reading high and exiting when it moves below a certain threshold. If a security's price action or another indicator seems to show a trend, but the Chande momentum oscillator shows sideways or choppy values (between -25 and 25), it could be a sign that the trend lacks momentum.
A full description of the Chande momentum oscillator and its applications can be found in Chande's book, "The New Technical Trader."