McClellan Oscillator Stock Indices Technical Analysis and McClellan Oscillator Stock Indices Signals
Developed by McClellan.
The McClellan Oscillator is an indicator that is based on smoothing the difference between the number of bullish candlesticks and bearish candlesticks. This indicator looks similar to the traditional MACD.
Stock Indices Technical Analysis and Generating Stock Indices Signals
This Oscillator is a momentum indicator that can be traded in the same way as the MACD indicator. There are 3 techniques that McClellan Oscillator can be used to generate stock indices signals.
Zero Center Line Crossover Signals:
Bullish Signals- When the oscillator crosses above zero center-line a buy stock indices signal is given.
Bearish Signals- When the oscillator crosses below zero center-line a sell stock indices signal is given.
Divergence Stock Indices Signals:
Looking for divergences between the McClellan Oscillator and stock index price can prove to be very effective in identifying potential reversal and/or stock indices trend continuation points in stock index price movement.
There are several types of divergences:
Classic Divergence (Regular Divergence)
- Bullish Divergence: Lower lows in stock index price action and higher lows in the McClellan Oscillator.
- Bearish Divergence: Higher highs in stock index price and lower highs in the McClellan Oscillator.
- Bullish Divergence: Higher lows in stock index price action and lower lows in McClellan Oscillator.
- Bearish Divergence: Lower highs in stock index price action and higher highs in McClellan Oscillator.
The McClellan Oscillator is also used to identify potential overbought and oversold levels in stock index price action movements. The overbought and oversold conditions are generated when the oscillator moves to extreme levels on one side and starts to turn, however, in a strong trending market the oscillator will stay in the overbought and oversold levels for a long time. It is not recommended to trade overbought and oversold levels to generate stock index trading signals. The best signal to use is the Center-line crossover signals to generate stock indices signals.