Trade Stock Indices

Analysis of the Stochastic Indicator

The shapes and how long market tops and bottoms last on the stochastic oscillator can give you a lot of trading info.

The amount of time that the price stays too high or too low is important when you're checking how strong the market trends are.

Stock Index Market Tops

Narrow market top that doesn't penetrate very high above 80%

Narrow market tops mean that the bulls are weak, and the Stock Index bears have over-powered the Indices bulls very quickly. This means that the Index bears might push the price further downward without much resistance from the Stock Index bulls.

Very high, wide market tops

Wide market tops mean that the Index bulls are very powerful a lot more than Indices bears & the ensuing short-term trend reversal (retracement), will be very short lived. The retracement on the stochastic oscillator trading indicator won't even reach the oversold levels before the stochastic oscillator indicator heads back to the over-bought levels.

Stock Index Market Bottoms

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

A narrow market base suggests that bearish sellers lack strength in driving prices lower. Buyers have swiftly gained market control, indicating that upward price movement is likely to persist for a period. Consequently, the prevailing upward market trend is expected to continue for some duration.

Very broad wide and deep market bottoms

A broad market bottom means sellers control prices in indexes. Any bounce up will likely fade fast.

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