Trade Forex Trading

Analysis of the Stochastic Indicator

Stochastic oscillator tops and bottoms reveal key indices info through their shapes and length.

How much and how long the market price stays either too high or too low is a very important thing to look at when figuring out how strong the market trends are.

Market Tops

Narrow market top that does not reach and move high above 80% level

Narrow market tops indicate weakened bullish momentum and dominance by bearish forces in stock indices. This suggests the possibility of further downward movement driven by bearish pressure with minimal resistance from bulls.

Very high, wide market tops

When broad market peaks are observed, it signifies considerable strength among Stock Index bulls (buyers) compared to the Indices bears, suggesting that any subsequent brief trend reversal (retracement) will be very brief. In such scenarios, the retracement on the stochastic oscillator indicator might not even reach the oversold threshold before the stochastic oscillator changes direction and moves back toward overbought territory.

Market Bottoms

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

A tight market low shows weak bears on indices. Bulls grab control quick and push prices up. This up move will last a bit. The rising trend keeps going for now.

Very wide and broad market bottoms

A broad market bottom means index bears hold strong. Sellers control price, so up moves won't last.

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