Stochastics

The Stochastics oscillator has been developed by Dr. George Lane to follow the momentum of the market. The indicator consists of two curves:
1. % K compares the latest closing price to the total change of the price over a given period
2. % D is the "signal line corresponding to the moving average of% K over a lower period than the previous one, usually 3 sessions.
This indicator varies from 0 to 100.

Example

Interpretation

When the Stochastics fluctuates near the 100 level, it denotes a situation of accumulation. Fluctuation near zero indicates a distribution.

The shape of the curve Stochastics gives some indication of the future:

• A narrow minimum which is not very deep indicates that the "bears" are weak and that the correction should be strong.
• A broad and deep minimum indicates that the "bears" are strong and that the correction should be low.

And vice versa:

• A narrow maximum which is not very deep indicates that the "bulls" are weak and that the correction should be strong.
• A broad and deep maximum indicates that the "bulls" are strong and that the correction should be low.