What Is Close Location Value (CLV)?

Close location value (CLV) is a metric utilized in technical analysis to assess where the closing price of a security falls relative to its day's high and low prices. CLV values range from +1.0 to -1.0, where a higher positive value indicates the closing price is nearer to the day's high and a greater negative value that the closing price is nearer to the day's close.

Key Takeaways

  • Close location value (CLV) indicates an asset's closing price relative to its intraday high and low.
  • A positive value means the close is near the high, and negative to the low. CLV values of +1 would mean the closing price is the same as the day high, and -1 the day low.
  • CLV is used in conjunction with other indicators and combinations form the basis of markers such as accumulation and distribution.

The Formula for CLV Is:

CLV=(CloseLow)(HighClose)HighLow\begin{aligned} &\text{CLV} = \frac { ( \text{Close} - \text{Low} ) - ( \text{High} - \text{Close} ) }{ \text{High} - \text{Low} } \\ \end{aligned}CLV=HighLow(CloseLow)(HighClose)

Understanding Close Location Value

Close location value is a technical analysis tool used to measure the location of the price in relation to the high-low range. It moves in the range from -1 to +1, or, if multiplied by 100, in the range from -100 percent to +100 percent.

CLV readings close to 1 (or 100 percent) indicate that closing price is near its high and it would be considered as a bullish sign. CLV readings close to -1 (or -100 percent) reveal that closing price is near its low and it could be considered as a bearish sign. CLV readings that are close to zero are considered neutral.

Close location value is employed in the calculation of the accumulation/distribution line, a technical indicator used to determine the money flows out of or into a particular security. Combining CLV with additional technical indicators like accumulation/distribution has become increasingly popular as it is regarded as a more robust measure than relying alone on the security's closing price.

Using Close Location Value

On its own, the close location value is not considered to be very important by most traders. This indicator is primarily used as a variable in other technical equations. For example, the CLV features prominently in the calculation for the Accumulation / Distribution Line:

Accumulation/Distribution=CLV×Period’s Volume\begin{aligned} &\text{Accumulation/Distribution} = \text{CLV} \times \text{Period's Volume} \\ \end{aligned}Accumulation/Distribution=CLV×Period’s Volume

One reason why CLV is not considered useful on its own is that it is extremely sensitive to random spikes or drops in prices. This heightened volatility renders it almost useless in many circumstances, which is why stochastics are preferred as a reliable high-low relationship metric. Stochastics is less choppy and which uses a different formula to determine price location in the high-low range.

When not part of another equation, the close location value can be used to confirm or reject possible divergences. Any traders who are using this strategy would be advised to use an intermediate or long-time period for their CLV, which allows enough of a historical perspective to not overreact to every fluctuation.