Day Stochastics

         Use the day stochastics question to test for overbought and oversold levels and their effect on market behavior.

Example:

         The 9-day fast stochastic is crossing up below 30.

Questions from Traders:

         How often does the 9-day fast stochastic achieve these oversold levels? Do these levels impact the next day’s price action?

Setting Up the Search:

Click on the parts of the box below where appears for explanations of features.

Answers:

         This example yielded the most surprising answer among our tests for overbought and oversold levels. The 9-day fast stochastic crossed up below the 30 level about once a month. However, when we refined the search to check how often the opening price the next day was higher than the oversold close, we found that 58% of the time the market actually opened lower. This suggests that the 9-day RSI is a much better indicator of oversold levels than the 9-day stochastic. It also suggests that a different time-interval stochastic might yield a more accurate result.