Trade Stock Indices

Analysis of the Stochastic Oscillator

A lot of info can be gathered from the shapes and duration of the market tops and bottoms of the stochastic oscillator trading indicator.

The amount of time that indices stays overbought or oversold is an important factor when analyzing the momentum of the market trends.

Trading Market Tops

Narrow market top that does not reach very high above 80 %

Narrow market tops means that the bulls are weak, and the trading bears have over-powered the trading bulls very quickly. This means that the trading bears may & might push price further down without much resistance from the market bulls.

Very high, wide market tops

Wide market top mean that the trading bulls are very powerful much more than the trading bears and the ensuing shortterm trend reversal (retracement), will be very short lived. Retracement on the stochastic oscillator technical indicator won't even reach the oversold levels before the stochastic oscillator indicator moves & heads back to the over-bought levels.

Trading Market Bottoms

A narrow market bottom which does not reach very deep below 20%

The narrow market bottom means that indices trading bears are weak in their attempt to push the price down, the bulls have gained control of price pretty fast so price movement upwards will continue for-some time. And the upward trend direction will continue for-some time.

Very wide, deep market bottoms

A wide market bottoms is a sign that the trading bears are very strong and the sellers are in control of the price, henceforth any retracement upwards won't stay for long.

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