Skip to main content
Track Stochastic oscillator
39 / 42
Search the archiveLibrary
Library

2018issue C098-11

Weekly and daily stochastic readings with a long moving average and support

A slower 70-day stochastic and a faster 14-day stochastic can be read together, then checked against a long simple moving average and nearby support or resistance, so a pullback can be judged as a correction or as the start of a reversal.

  • The weekly-and-daily construction plots two slow stochastic %K lines: a 14-day line and a 70-day line, the latter chosen as 14 weeks of five trading days.
  • Slow %K is fast %K smoothed with a three-period simple moving average, and it is the only stochastic line plotted on each horizon.
  • The 70-day line is less sensitive and produces fewer signals than the 14-day line because it locates the close in a longer high-low range.
  • Support and resistance around prior peaks, plus whether price reclaims a 200-day simple moving average, are used with the two lines to judge whether a pullback is starting, ending, or continuing a larger trend.
Entries in this reading3 entries
Current trackStochastic oscillator170 readingsSupport and resistance170 readingsMoving average449 readings

Reading both horizons at once

The weekly-and-daily stochastic plots two three-day-smoothed slow stochastic %K lines so that weekly-scale location and daily-scale location can be read together. One line uses a 14-day lookback. The other uses a 70-day lookback, chosen as 14 weeks of five trading days.

Those two lines are then read against a long simple moving average and against support and resistance taken from prior swing highs and lows. The historical workflow uses that combination to judge whether a pullback is starting or ending, and whether a bounce is a reversal or a continuation.

How each slow percent K line is built

Fast %K is the close minus the lookback low, divided by the lookback high-low range and scaled by 100. Slow %K is that series smoothed with a three-period simple moving average.

On each horizon, only the slow %K line is plotted. The same calculation is applied to the 14-day lookback and to the 70-day lookback, so the close is located inside a short high-low range and inside a longer high-low range at the same time.

Weekly versus daily slow stochastic, 25 August–9 September 2015

After the late-August flush the 14-day slow %K rebounds toward the middle of its range while the 70-day slow %K only creeps out of the teens, so the short horizon looks repaired before the long horizon does. The points are the exact %Kw and %Kd columns from the source worksheet for 25 August through 9 September 2015.
After the late-August flush the 14-day slow %K rebounds toward the middle of its range while the 70-day slow %K only creeps out of the teens, so the short horizon looks repaired before the long horizon does. The points are the exact %Kw and %Kd columns from the source worksheet for 25 August through 9 September 2015.daily · 2015-08-25T00:00:00.000Z to 2015-09-09T00:00:00.000Z

Daily %Kd is a 3-session SMA of 14-day fast %K; weekly %Kw is a 3-session SMA of 70-day fast %K (14 weeks of trading days). The source printed only this partial slice of a longer spreadsheet.

What a reading says about the close

A reading above 50 means the close sits in the upper half of the chosen high-low range. A reading below 50 means the close sits in the lower half. Traditional overbought and oversold bands of 80 and 20 mark near-high and near-low closes.

Those 80 and 20 thresholds sit on the zero-to-100 stochastic scale and are treated as adjustable bands rather than automatic trade triggers. The 70-day line is less sensitive and produces fewer signals than the 14-day line because it locates the close in a longer high-low range.

Checking the lines against trend and price levels

The moving average in this workflow is a long simple moving average, typically the 200-day SMA. It is used as a trend filter that a bounce must reclaim or fail to reclaim.

Support and resistance are prior swing highs and lows, including levels around prior peaks. They are used with the two stochastic lines to judge whether a pullback in an uptrend is starting or ending, and to confirm whether a stochastic signal is ending a correction or starting a new trend.

A downtrend example from the historical workflow

In a downtrend example, a close below the 200-day simple moving average together with a weekly-scale oversold reading is treated as a possible start of a larger decline.

An overbought weekly-scale bounce that fails to recapture the 200-day simple moving average and then breaks support is treated as continuation of the downtrend rather than a completed reversal.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
39 of 42 in the Stochastic oscillator track
201840-43 pp.Next on Stochastic oscillatorA confirming workflow for rotating from discretionary to staplesConsumer discretionary names such as retailers, hotels, apparel, restaurants, leisure, durables, autos, and media were presented as expansion-sensitive, while staples such as food, beverages, household products, drugs, and tobacco were presented as contraction-resilient, without a one-to-one correlation.
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
By fieldIndicators and filters682 readingsBy year201898 readings
All 170 readings tagged Stochastic oscillator
Also on Stochastic oscillator5 readings
2018Combining a weekly stochastic, a long moving average, and two-day resistance2008Lock the stop at support before sizing a stochastic entrySupport and resistance1987Stochastic fast and slow construction as a rebuildable stack1990Money-fund maturity as a companion Eurodollar chartSupport and resistance1990Walk-forward screen for yen indicator rules