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1984issue C031-6

Constructing the slow stochastic from a five-session range

The stochastic oscillator places the close inside a five-session high-low window and plots the result as K and %D. Regular and slow readings can be rebuilt from a sixteen-column worksheet, after which %D-price divergences and higher-horizon trendlines become written rules for which daily crosses are allowed to stand.

  • K and %D locate the close inside a five-session high-low window so the two series can mark stretched versus depleted conditions.
  • Regular K and regular %D are taken from that window. The slow construction sets slow K equal to regular %D and sets slow %D equal to a three-session average of regular %D.
  • A K cross of %D is the operational cue. Price-%D divergences and weekly or monthly trendlines decide which daily crosses are allowed to stand.
  • Because five-session extremes dominate the arithmetic, a confirmed reading can appear after a large share of a move, so the oscillator is treated as coincidental.
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What the two series mark

The oscillator is built from the observation that closes cluster toward the session high during advances and toward the session low during declines. It is plotted as two series, K and %D, to mark stretched versus depleted conditions.

Those series are a pair of plotted ratios that locate the close inside a lookback high-low window. The readings can be left raw or smoothed.

A sixteen-column worksheet

Regular and smoothed readings can be produced from closed-form formulas or from a sixteen-column worksheet. The worksheet stores date, high, low, close, the five-session extreme high and low, eighths-converted differences, three-session totals, and percentage ratios.

Regular K, regular %D, and the slow construction

Regular K equals 100 times the current close minus the five-session low, divided by the five-session high minus that low. Regular %D equals 100 times the three-session sum of those close-to-low distances, divided by the three-session sum of the ranges.

In the slow construction, slow K is regular %D. Slow %D is the arithmetic mean of regular %D over the current session and the prior two sessions.

Regular K and slow %D from the five-session worksheet

Regular K (column 10) and slow %D (column 16) rebuilt from the sixteen-column worksheet for the January 23–February 10 sessions. The table turns each five-session high-low window into K, then three-day sums and a further three-day average into the slow oscillator. Traders should see K swing from a 100 print on January 24 down through the mid-20s and into the mid-teens by February 10, while slow %D lags and eases from the mid-60s toward 345 (34.5 percent), the same construction the article uses before applying divergence and higher-horizon filters.
Regular K (column 10) and slow %D (column 16) rebuilt from the sixteen-column worksheet for the January 23–February 10 sessions. The table turns each five-session high-low window into K, then three-day sums and a further three-day average into the slow oscillator. Traders should see K swing from a 100 print on January 24 down through the mid-20s and into the mid-teens by February 10, while slow %D lags and eases from the mid-60s toward 345 (34.5 percent), the same construction the article uses before applying divergence and higher-horizon filters.Unnamed commodity from the source worksheet · Daily · 1984-01-23T00:00:00.000Z to 1984-02-10T00:00:00.000Z

Slow %D in the source worksheet is stored as a three-digit integer (column 16 = 10 × percent). Dates skip weekends. The first four rows lack a complete five-session window, so the series starts on January 23 for K and on January 27 for slow %D. George Lane’s five-session high-low window is the period used throughout.

Crosses, divergences, warnings, and failures

A K cross of %D is the operational cue. A higher price peak against a lower %D peak is treated as a bearish divergence. A lower price trough against a higher %D trough is treated as a bullish divergence. The later cross is used as the attached action trigger.

A sharp K reversal that does not cross %D the same session is a warning that a cross may arrive within two sessions. A few-percent pullback after a cross that does not recross before K continues is a failure. That failure is described as typically followed by higher highs in both price and %D.

Which daily crosses are allowed to stand

Weekly or monthly price and oscillator charts, including drawn trendlines, are used to accept or ignore daily crosses. A weekly downtrend is treated as intact until price breaks its trendline.

An oscillator trendline with no high-side divergence is read as confirmation. Higher oscillator troughs against lower price troughs flag a possible approaching low that still needs a high-side mismatch and a break of the oscillator trendline.

Readings near 0 and 100

The method emphasizes readings above 85 percent and below 15 percent. After K reaches 0, a two-to-five session bounce and a second visit to 0 is described as raising the chance of at least a minor advance. The mirror sequence is described near 100.

Trendlines drawn on the oscillator can mark support or resistance for %D.

A coincidental reading needs a different companion signal

Because the five-session extremes dominate the arithmetic, a confirmed reading can appear after a large share of a move. The oscillator is therefore described as coincidental and is to be paired with a signal that is not built the same way.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
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All readings on this track · 53 readings
  1. 1984Constructing the slow stochastic from a five-session range
  2. 1985Gold-proxy trendlines and a January support base
  3. 1988Construct a five-week new-highs total as a breadth chart
  4. 1988Stacked channel, trendline, and moving-average warnings in 1987
  5. 1989Auditing fifth-wave counts with equality, Fibonacci, and trendlines
  6. 1990Money-fund maturity as a companion Eurodollar chart
  7. 1990Constructing wave targets from ratios, triangles and trendlines
  8. 1992Nested time frames for trend and channel signals
  9. 1992A pre-trade checklist for trendline breaks and loss limits
  10. 1992Bond-fund timing inside trendlines, retracements, and dual averages
  11. 1992Two-point trendline construction from rise over run
  12. 1993Disposable chart ratings from confirmed level tests
  13. 1993When trend channels define fair value after dislocations
  14. 1993Valid trendline anchors for three-part reversals
  15. 1994Pairing stochastic divergence with trendline invalidation
  16. 1995Constructing measured targets after trendline breaks
  17. 1997A three-part pullback plan with RSI, Fibonacci retracements, and a tight trendline
  18. 1998Rule-based Trendline construction for testable entries
  19. 2000Constructing trendlines, breaks, and role reversal
  20. 2000Constructing speed resistance lines from trend extremes
  21. 2000Nasdaq tech cycle stages with a 15-day average and trendlines
  22. 2002Two-session candlesticks that test support, resistance, and trendlines
  23. 2002Constructing Fibonacci ratio grids from a peak and a trough
  24. 2002Evaluate trendline geometry before trusting a breakout
  25. 2002Trendline, volume, and breakout hypotheses versus cycle-end stories
  26. 2003Writing the long S&P 500 trendline and cycle junction as one hypothesis
  27. 2003A three-event trendline reversal checklist
  28. 2003Reverse-engineered Relative Strength Index price curves
  29. 2003Two-anchor trendline construction without cut-through
  30. 2004Treat a 15-minute e-mini stair-step as congestion under a daily lid
  31. 2005A 50-day average, a trendline break, and an open barrier flip
  32. 2005Matching a forty-day average to a crude trendline
  33. 2006Constructing a relative spread-strength oscillator for staged cycle confirmation
  34. 2006Constructing a log-change probability line for trend and range rules
  35. 2007Linked cross breaks as dollar-pair filters
  36. 2007A case study in support, resistance, and trendline role reversal on currency charts
  37. 2007Reading trendline breaks in a housing-sector case
  38. 2007Constructing replaceable trendlines for break signals
  39. 2007Reading trendline breaks before the mechanical signal
  40. 2007Trading choppy forex trends with channels and Fibonacci breaks
  41. 2007A stacked hypothesis from wave, trendline, ratio, and candle
  42. 2008Exit rules before entry: trendline, support, and stops
  43. 2008Capitulation headlines need trend confirmation
  44. 2008RSI divergence classes, ratio thresholds, and trendline tests
  45. 2010Support and resistance as falsifiable chart hypotheses
  46. 2012Reading a 2012 software directory as a breakout and channel case study
  47. 2013Treat a currency position as a regime, then map shared levels
  48. 2014Evaluating trendline swing size per market
  49. 2018Intermarket regime stress and the January 2018 trendline break
  50. 2018Weekly and daily Stochastic oscillator construction on a single daily chart
  51. 2018Constructing trendlines, support, and breakout targets from crowd exits
  52. 2019Trendline break and Fibonacci retracement as a falsifiable outlook check
  53. 2019Monthly S&P 500 false-break versus the decade trendline
By fieldIndicators and filters682 readingsBy year198412 readings
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