Stochastic Oscillator & Williams %R
20/40 DMA
Charts courtesy of
StockCharts.com
Williams %R
Shows relationship of the close price relative to the high-low range over a set period of time.
Readings from 0 to -20 are considered overbought, readings from -80 to -100 oversold.
For confirmation that the price reversal from overbought or oversold levels has occured cross above or below -50 is used.
For longer period insight use 28-day %R as more reliable. When the 28-day %R moves to overbought or oversold levels, it typically remaines there for an extended period and the stock continues its trend.
Stochastic Oscillator
Shows the location of the current close price relative to the high/low range over a set number of periods.
Readings below 20 are considered oversold and readings above 80 are considered overbought.
For reliable signals wait for a divergence to develop from overbought or oversold levels. Once the oscillator reaches overbought levels, wait for a negative divergence to develop and then a cross below 80. This usually requires a double dip below 80 and the second dip results in the sell signal. For a buy signal, wait for a positive divergence to develop after the indicator moves below 20. This will usually require a trader to disregard the first break above 20. After the positive divergence forms, the second break above 20 confirms the divergence and a buy signal is given.
20/40 Simple Moving Averages
Be carefull when price is in the "Selling Zone" - when it rises above 20 DMA but is yet under 40 DMA.
RSI & MAC signals
Charts courtesy of
StockCharts.com
RSI (Relative Strength Index)
Momentum oscillator that compares the magnitude of a stock's recent gains with the magnitude of its recent losses. The RSI ranges between 0 and 100, with 70 and 30 commonly used as overbought/oversold levels.
Divergences: Buy and sell signals can also be generated by looking for positive and negative divergences between the RSI and the underlying stock. Popular method is to look for divergence in which the price is making a new high, but the RSI is failing to surpass a previous high. This divergence may be and indication of an impending reversal. When RSI then turns down and falls below its most recent trough, it have completed a Failure Swing, which is considered a confirmation of an impending reversal.
Centerline Crossover:
The centerline for RSI is 50. Readings above and below can give the indicator a bullish or bearish tilt. On the whole, a reading above 50 indicates that average gains are higher than average losses and a reading below 50 indicates that losses are winning the battle.
MACD (Moving Average Convergence Divergence)
Measures difference between two moving averages, with third MA as a trigger line.
Signals: divergence, moving average crossover and centerline crossover. Using a combination can generate more robust signals.
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