Period Stochastics

         Use the period stochastics question to test for overbought or oversold conditions and the impact they have on market behavior.

Example:

         The 9-period fast stochastic crossing up below 25.

Questions from Traders:

         How often does the period stochastic cross below the 25 level? Does this have any significance for the next day’s trading?

Setting Up the Search:

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

Answers:

         About once every two weeks, the 9-period fast stochastic will get to the point where it is oversold and crossing up from levels below 25. In these instances, just over 57% of the time the market will open higher the following day. Comparing stochastics versus the RSI as a measure of overbought or oversold conditions, we found that the 9-period RSI correlates slightly better than the 9-period stochastics with market price behavior.