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One way to interpret and analyze the Index signals provided by the Stochastic Oscillator is similar to a moving average crossover strategy. In the Stochastic oscillator indicator, a crossover signal happens when the %K and %D lines crossover.

These crossover Indices signals should be taken with scrutiny as, out of the Indices stochastics oscillator signal interpretations discussed so far, they produce the most Index trading whipsaws. Whipsaws or False Index signals are especially common in the Fast Stochastic Oscillator Indicator edition.

Stochastic Oscillator Crossover Signals:

For a Sell signal, a indices trader looks for the %K line to move below the %D line.
For a Buy Indices signal, a stock index trader looks for the %K line to move above the %D line.

Since stochastic crossovers Stock Index signals of %K and %D are often unreliable, they should be validated with other indicators.

Stochastic Oscillator Center-line

The stochastic oscillator center-line lies at the 50% level in the stochastic indicator panel. It implies that there's a balance between bulls & bears. Situations when the stochastic indicator crosses the centerline can give an insight into whether the buyers or sellers will start to control the Indices market trend.

Stochastic Oscillator Center-line Index Cross-overs Signals

If the Stochastic oscillator indicator is staying below the center-mark (between 40%-50%) and crosses up, then it is an indication the Indices bulls are taking control of the Index market.
If the Stochastic oscillator indicator is staying above the center-mark (around 50%-60%) and then crosses below center line, it can be an indication that the Index bears have taken control of the Index market.

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