The Elder Ray Indicator is a measure of bullish and bearish “power” and is a rather simple calculation of comparing the daily high and low to an exponential moving average.

Bull Power = Daily High - n-period EMA
Bear Power = Daily Low - n-period EMA

There are many possible interpretations of the Elder Ray Indicator since it is a simple way of comparing daily range to a smoothed average.

One common interpretation is to view it as bullish when (a) bear power is below zero but rising and (b) the previous bull power peak is higher than the previous peak.

Conversely, it can be considered bearish when (a) bull power is above zero but falling and (b) the previous bear power trough is lower than the previous trough.