Parabolic SAR is used to determine the direction of a security’s momentum and the point at which this momentum might switch direction. Calculation of the item is complex and beyond the scope of this discussion.

When the SAR is below the stock price it indicates bullish uptrend in price action and is also considered the support level for the stock. When the stock price falls below the SAR it leads to bearish trend in prices and the SAR acts as a resistance level. This filter is calculated by dividing the close price by the parabolic SAR and subtracting one to calculate how far is the close price from SAR in percentage terms. A high positive value of the indicator signals strong uptrend and vice versa.