Analysis of Stochastic Oscillator Indicator

A lot of energies information can be gathered from the shapes and duration of the market tops and bottoms of the stochastic oscillator technical indicator.

The amount of time that the energies instrument stays overbought or oversold is an important factor when analyzing the strength of the market trends.

Trading Market Tops

Narrow market top that does not reach very high above 80%

Narrow trading market tops means that the bulls are weak, and that the energies bears have overpowered the energies bulls very quickly. This means that the energies bears might push the price further down without much resistance from the energies bulls.

Very high, wide market tops

Wide market tops mean that the energies bulls are very powerful much more than the energies bears and the ensuing short term energies trend reversal (retracement), will be very short lived. The retracement on the stochastic oscillator technical indicator will not even reach the oversold areas before stochastic oscillator technical indicator moves back to the over bought levels.

Trading Market Bottoms

A narrow market bottom that does not reach very deep below 20%

The narrow market bottom means that energies bears are weak in their attempt to push the price down, the energies bulls have gained control of the price pretty fast so the price movement upwards will continue for a while. And the upward market energies trend will continue for a while.

Very wide, deep market bottoms

A wide market bottoms is a sign that the energies bears are very strong and the energies sellers are in control of the price, therefore any retracement upwards will not stay for long.