Stochastic oscillator is a momentum indicator that shows the location of the current close relative to the high/low range over a set numbers of periods.Closing levels that are consistently near the top of the range indicate accumulation(Buying pressure) and those near the bottom of the range indicates distribution(selling pressure).
Slow stochastic oscillator.
USES 1) Overbought /over sold conditions (80/20) .Some of the best signals ocurred when the oscillator moved from overbought territory back below 80 and from oversold teritory back above 20. 2)Cross over signals are quite frequent and can result in a lot of whipsaws. 3) One of the most reliable signal is to wait for divergence to develop from overbought or oversold levels.
1) Overbought level above 80 2) Negative divergence 3) Then crossess below 80.This usually requires a double dip below80 and second dip results in asell signal.
OR 1) Over sold level below 20 2)Positive divergence 3)Crossess above 20.Disregard the first break above 20, second break above 20 confirms the divergence and buy signal is given.
Values of slow stochs. 14/3/3 and 5/3/3.
K 39 system.(39/1/1).
Condition 1) K crosses above 50 2)Closing price is above previous weeks high close BUY signal is generated. OR 1) K crossess below50 2)Closing price below previous weeks low close. SELL signal is generated. Use weekly and daily charts.
The following are the characteristics of Bollinger Bands-:
1) Sharp price changes tend to occur after the bands tighten as volatility lessens. 2)When price moves outside the bands a continuation of the current trend is implied. 3)Bottom and tops made outside the bands followed by bottom and tops made inside the bands call for reversals in the trend. 4)A move originates at the band tends to go all the way to the other band.This observation is useful when projecting price targets. (Reversal of price when a candle closes outside the band and the subsequent candle closes inside the band)
These following points should be noted for an accurate interpretation.Price can and does walk up the upper bollinger band and down the bollinger band.Tags(touch) of bands are just that tags not signals.A tag of the upper bollinger band is not by itself a sell signal.A tag of the lower bollinger band is not by itself a buy signal.
Bollinger band divergence.
This indicator has certain characteristics which makes it ideal for predicting a reversal of a trend. 1) Firstly because of the way it is calculated 85% of the price action is contained with in the bands, and hence it gives a very good indication of the price being overbought or oversold in that time frame. 2 )Secondly widening of the bands shows increasing volatility and narrowing of bands shows decreasing volatility. 3)Bottoms and tops made outside the bands followed by bottoms and tops made inside the bands call for reversals in the trend. 4) When price approaches the upper or lower bands, there is almost always a reversal or a strong continuation.If there is a reversal we want to identify it correctly and to get in early. 5) The price of any currency, commodity etc across all time frames display a unique charecteristic that signals a change in trend. 6)It is generally observed that price will make a last thrust in the direction of the prevailing trend before changing direction. 7)This could be trend exhaustion or a final raising of stops in the market.This movement of the price is made with reducing momentum which is observed as a divergence between the price action and any indicator. 8)Bollinger bands show a dstinct advantage over other indicators/oscillators as it shows, when a trend change takes effect. 9)We can potentially identify divergence when a market has a close outside the band, followed by a close with in the band. 10)Reversal, move again outside, final thrust in the original direction.The next reversal which takes place inside the bands,signal change in direction. 11)The lower band and upper band acts as support and resistance.