Technical Analysis of Stochastic Oscillator Indicator

A lot of Stock Indices information can be gathered from the shapes & duration of the market tops & bottoms of the stochastic oscillator indicator.

The amount of time that the price stays overbought or oversold is an important factor when analyzing the strength of the market trends.

Market Tops

Narrow market top that does not reach very high above 80%

Narrow market tops means that the bulls are weak, & that the Indices bears have overpowered the Indices bulls very quickly. This means that the Indices bears might push the price further down without much resistance from the Indices bulls.

Very high, wide market tops

Wide market tops mean that the Indices bulls are very powerful much more than the Indices bears & the ensuing short term trend reversal (retracement), will be very short lived. The retracement on the stochastic oscillator indicator will not even reach the oversold levels before the stochastic oscillator indicator moves back to the overbought levels.

Market Bottoms

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

The narrow market bottom means that Stock Indices bears are weak in their attempt to push the price down, Indices bulls have gained control of the price pretty fast so the price movement upward will continue for a while. And the upward market trend will continue for a while.

Very wide, deep market bottoms

A wide market bottom is a sign that the Indices bears are very strong & the Indices sellers are in control of the price, therefore any retracement upward will not stay for long.