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1998issue C101-4

Oversold confirmation as a staged rule-based-entry case

A daily oversold relative-strength-index and stochastic-oscillator screen was only the first filter in a staged rule-based-entry sequence. The procedure withheld the buy until weekly oscillators confirmed and a daily close reclaimed the required average, then later exited when a new high failed to extend.

  • The daily oversold oscillator screen was only a candidate filter. Weekly relative-strength-index and stochastic-oscillator confirmation could still withhold the buy.
  • Multiple-time-frame-confirmation used daily data to screen, a higher-timeframe chart to confirm trend, and a 60-minute chart only to time the fill.
  • When the 50-day average was below the 200-day average, price still had to stand at least above the 50-day average. When the 50-day average was above the 200-day average, price had to stand at least above the 200-day average.
  • A dip back under the 50-day average did not cancel the long. Close-based-invalidation sat just below the 52-week low, and a failed-extension-exit followed a new high that failed for three sessions.
Entries in this reading3 entries
Current trackStochastic oscillator170 readingsRule-based entry174 readingsRelative Strength Index186 readings

The daily screen only created a candidate

The daily rule-based-entry screen required a 3-period relative-strength-index to cross above a 14-period relative-strength-index and a 14-period stochastic-oscillator %K and %D crossover with both values below 25.

Editorial: rule-based-entry here means a predefined procedure that converts oscillator, trend, and location tests into enter, exit, or abstain actions. The daily crossover is a watchlist event, not a fill.

Price still had to reclaim an average

When the 50-day average was below the 200-day average, the buy screen still required price at least above the 50-day average.

When the 50-day average was above the 200-day average, price had to stand at least above the 200-day average.

Baldor Electric daily close versus 50-day and 200-day averages

By 10 October 1996 Baldor Electric closed at $19.00, still under the 50-day average at $20.24 and the 200-day at $20.73, so the daily oversold screen remained a watchlist event rather than an entry. The last prints are the on-chart quotes; the path from July is read from the daily candlestick pane.
By 10 October 1996 Baldor Electric closed at $19.00, still under the 50-day average at $20.24 and the 200-day at $20.73, so the daily oversold screen remained a watchlist event rather than an entry. The last prints are the on-chart quotes; the path from July is read from the daily candlestick pane.Baldor Electric (BEZ) · Daily · 1996-07-01T00:00:00.000Z to 1996-10-10T00:00:00.000Z

Earlier closes and both average traces are read from the raster to about a tenth of a dollar. The 10 October close ($19.00) and the two moving-average prints (20.240 and 20.726) are the TradeStation header values.

Screen, confirm, then time

Candidate selection used daily data, trend confirmation used a higher-timeframe chart, and entry timing used a 60-minute chart.

Editorial: that split is multiple-time-frame-confirmation. A lower timeframe screens, a higher timeframe confirms trend, and an intraday chart is used only to time the fill.

Weekly oscillators could still withhold the buy

After the daily oscillator screen triggered, weekly relative-strength-index and stochastic-oscillator readings were still treated as an unfinished downtrend, so the procedure withheld a buy.

Weekly relative-strength-index and stochastic-oscillator bullish crossovers were treated as the required trend-change confirmation.

Editorial: those weekly tests are the higher-timeframe trend confirmation in this case.

The 60-minute chart timed the fill

The entry was taken from the 60-minute chart only after a daily close stood above the 50-day average and the weekly oscillators were in a bullish mode.

A dip did not cancel the position

A later dip back under the 50-day average did not cancel the position. A close-based stop was set just below the 52-week low after the original checklist was rechecked.

Editorial: that stop is close-based-invalidation. It triggers on a closing print beyond a preselected level rather than on an intraday spike.

When a new high failed to extend

Exit watch began when price was above both the 50-day and 200-day averages while the stochastic-oscillator was overbought, the 3-period relative-strength-index was above 90, and MACD was declining toward zero.

The designated exit arrived after price printed a new high and then failed to penetrate that high for three consecutive sessions.

Editorial: that close is a failed-extension-exit, leaving a long after price prints a new high and then cannot push through that high for a stated number of sessions.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
13 of 42 in the Stochastic oscillator track
19991-2 pp.Next on Stochastic oscillatorConstructing regular and slow stochastic oscillatorsRegular percent-k is 100 times the close minus the lookback lowest low, divided by the lookback highest high minus lowest low.
All readings on this track · 42 readings
  1. 1987Stochastic fast and slow construction as a rebuildable stack
  2. 1989Building the stochastic oscillator from close location
  3. 1990Monthly stochastics as a multi-year bond regime filter
  4. 1990Walk-forward screen for yen indicator rules
  5. 1990Slow stochastic construction for index pullback entries
  6. 1991Random Walk Index construction with an adaptive lookback
  7. 1991Building a two-stage stochastic oscillator from close location
  8. 1992Constructing fast and slow stochastic oscillator lines
  9. 1992Constructing nested stochastic lookbacks
  10. 1994Construct the four-state price-volume rank before filtering it
  11. 1996Crowded stochastics, false breakouts, and hidden stops
  12. 1997Fade and follow entries from stochastic extremes
  13. 1998Oversold confirmation as a staged rule-based-entry case
  14. 1999Constructing regular and slow stochastic oscillators
  15. 2001Construct a variable-interval simple moving average from stacked extremes
  16. 2001Threshold RSI and stochastic setups with next-bar stops
  17. 2001Two tests of a rate-adjusted earnings-yield gap
  18. 2002Constructing a two-line stochastic from a range-normalized close
  19. 2002Inspect mechanical stochastic daytrade rules on one bar
  20. 2003Constructing an adaptive stochastic RSI
  21. 2003Four parameters that construct a stochastic oscillator
  22. 2004Volume breakout as signal, pullback as entry
  23. 2004A first currency-market checklist with two averages and a slow stochastic
  24. 2005Shared-scale cycle indexes with companion oscillators
  25. 2005Current-bar versus prior-bar range construction for the stochastic oscillator
  26. 2005Two-session moving-average pullback short
  27. 2006Market condition as a permission layer for moving averages and oscillators
  28. 2008Lock the stop at support before sizing a stochastic entry
  29. 2010Construct a center-line volume oscillator and read it with a stochastic oscillator
  30. 2010Sharpened RSI turns with rainbow averages and a slow stochastic
  31. 2011Build a Spearman rank oscillator from ordered closes
  32. 2012Gold as a regime-dependent hedge in the euro-area crisis
  33. 2012Pairing moving averages with variable-length stochastics
  34. 2014Two-leg stochastic stress oscillator as a rebuild drill
  35. 2014Ingress dates as price bases for relative strength, stochastics, and moving averages
  36. 2017Constructing a dual EMA stochastic from range normalization
  37. 2018Constructing a two-stage stochastic RSI for comparable price-oscillator divergences
  38. 2018Combining a weekly stochastic, a long moving average, and two-day resistance
  39. 2018Weekly and daily stochastic readings with a long moving average and support
  40. 2018A confirming workflow for rotating from discretionary to staples
  41. 2019Stochastic scan thresholds, averages, and formula syntax
  42. 2020Constructing Slow %K as a two-stage helper
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All 170 readings tagged Stochastic oscillator
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