Bull Bear Power Indicator

The Bull Bear Power indicator, developed by Dr. Alexander Elder for identifying market strength and spotting entry or exit points based on price momentum. It helps traders assess who’s in control of the market and whether that control is gaining or fading.

Test the Bull Bear Power Indicator in Action

The Bull Bear Power Indicator is a technical analysis tool that will help you to trade more effectively.
Learn more about it in our educational guide. Confirm the theory on practice.

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What is Bull Bear Power Indicator

The Bull Bear Power indicator helps to measure the strength of market participants - bulls and bears. These indicators are primarily used to detect the balance of power in the market and identify potential reversals or entry points.

Both indicators work alongside a trend-following component, typically the 13-period Exponential Moving Average (EMA). Together, they form a hybrid trading setup that combines trend direction and market momentum. When the price moves significantly above or below the EMA, it suggests either bullish or bearish dominance.

Bull Bear Power Indicator Example

Let’s walk through a simple example to understand how the Bull and Bear Power indicators work in practice. Suppose a stock is currently trading with a 13-period EMA of $100.

On a particular candlestick:

High price = $105
Low price = $97

Calculation

Bull Power = High – EMA = 105 – 100 = +5
This positive value shows that bulls were strong enough to push the price well above the average.
Bear Power = Low – EMA = 97 – 100 = –3
This negative value indicates that bears still had some control, dragging the price below the EMA.

Interpretation:

The +5 Bull Power suggests strong bullish momentum.
The –3 Bear Power still reflects selling pressure, but it's less dominant compared to bullish strength.

If Bull Power continues to rise while Bear Power becomes less negative, this may signal increasing buyer dominance, a potential buy setup. If the reverse happens, falling Bull Power and increasingly negative Bear Power, it could suggest a sell signal or a weakening uptrend.

These readings are even more meaningful when viewed in combination with:

The slope of the EMA (to confirm trend direction)
Price divergence patterns
Key support/resistance zones

Bull Bear Power Indicator Formula

The Bull and Bear Power indicators are calculated by comparing price extremes (highs and lows) to a moving average, typically the 13-period EMA. The goal is to measure how far buyers or sellers are able to push the price away from its average level.

Formulas

Bull Power = High – EMA(13)
Bear Power = Low – EMA(13)

Where:

High = Highest price of the current candlestick
Low = Lowest price of the current candlestick

Bull Power (+) occurs when buyers push the price above the EMA, the higher the value, the stronger the buying pressure. Bear Power (–) occurs when sellers drag the price below the EMA, the more negative it is, the stronger the selling pressure.

Indicator Behavior	Signal Type	Meaning
Bull Power > 0 and rising	Bullish continuation	Buyers gaining strength
Bear Power < 0 and rising	Potential bullish shift	Sellers losing control
Bull Power > 0 but falling	Caution	Buyers may be losing steam
Bear Power < 0 and falling	Bearish continuation	Sellers dominating
Bull/Bear Divergence vs Price	Reversal potential	Trend may be weakening or reversing

Practical Use in Trading

The Bull and Bear Power indicators work best as supporting tools. Their true value lies in helping you gauge momentum and confirm price action during trending conditions.

1. Use the EMA Slope to Confirm the Trend

Before using Bull or Bear Power for signals, always check the direction of the EMA (typically EMA 13):

If EMA is sloping upward, look for buy setups using Bull/Bear Power
If EMA is sloping downward, focus on sell setups

This ensures you’re trading with the trend, not against it. The EMA acts as a filter to avoid entering during weak or sideways phases.

Example: If EMA is rising and Bear Power is moving toward zero from deep negative territory, that could mean sellers are backing off, bulls are taking control again.

2. Combine with Confirmation Indicators (RSI, MACD, Volume)

Bull and Bear Power can identify momentum shifts, but they don’t always show the full picture. That’s why many traders pair them with:

RSI indicator to check for overbought/oversold conditions or hidden divergence
MACD to confirm momentum alignment
Volume to see if a breakout or trend continuation is backed by strong participation

For Example if Bear Power is weakening (less negative) while RSI is rising from an oversold zone and volume increases on bullish candles, this gives a much stronger signal to buy than Bear Power alone.

3. Watch for Divergences

Divergence between the indicator and price is often a leading signal of a potential reversal.

Bullish Divergence: Price makes a lower low, but Bear Power makes a higher low, this indicates that selling pressure is fading.
Bearish Divergence: Price makes a higher high, but Bull Power makes a lower high and this suggests that bullish momentum is weakening.

These divergences often precede turning points and can offer early entries, especially when confirmed by a change in the EMA slope or candlestick structure (e.g., engulfing patterns, dojis).

4. Fine-Tune Entries During Pullbacks

Rather than entering at breakout highs or lows, traders can use Bull and Bear Power to time entries during pullbacks within trends.

For example:

In an uptrend, wait for a small dip where Bear Power becomes less negative (suggesting sellers are losing control), and Bull Power starts rising again.
In a downtrend, watch for a short rally where Bull Power flattens or turns down, signaling that buyers are losing ground again.

This helps traders enter at more favorable prices, with tighter stop-loss placement and better risk/reward setups.

Limitations

Although Bull and Bear Power indicators provide valuable insight into market dynamics, they also come with limitations that traders should be aware of.

1. False Signals in Sideways or Choppy Markets

These indicators are most reliable during clear trending conditions. In sideways markets:

The EMA tends to flatten, making it less meaningful as a trend filter
Bull and Bear Power histograms may whipsaw above and below zero
This creates false signals that lead to premature or losing trades

2. Vulnerable to High Volatility News Events

Sudden news releases (like CPI, Fed decisions, or geopolitical shocks) can spike highs and lows far away from the EMA, distorting Bull/Bear Power readings:

You may see extreme values that don’t reflect real trend strength
These can trigger false entries right before a reversal or snapback move

Avoid using these indicators alone around major economic events. Wait for the market to settle and re-align with technical patterns.

3. Lack of Context Without Trend Confirmation

The indicators are designed to measure momentum, but not direction by themselves. Relying only on a histogram moving above or below zero, without checking the trend, can result in:

Buying during a downtrend just because Bull Power turns positive
Selling during an uptrend due to a temporary drop in Bull Power

Always check the trend context via EMA direction, price structure (higher highs/lows or lower highs/lows), and confluence with other tools before acting.