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Strategies & Market Trends : Ask DrBob -- Ignore unavailable to you. Want to Upgrade?

To: nazticker who wrote (1074)	8/23/2000 1:14:13 PM
From: Drbob512	Read Replies (1) \| Respond to of 100058

Nazticker: Great question, that I am sure many wonder about. The way the stochastics are caluculated does not correlate very well with point for point moves in stocks/indices, but gives a good indication of momentum and oversold/overbought readings. When the oscillator comes down but the price doesn't or not by much, then it represents a clue that the price is strong and when the stochastic comes back up, (after resetting), then the rally could be strong. Sometimes the price falls in more intensity than the stochastic, especially in weak markets. But you might remember when JDSU was trading at 134 for an hour or two when the Nasdaq was falling apart a few weeks ago and I mentioned that it probably was high level distribution. That was a case whereby the stochastics were holding up well and it was a high relative strength stock but the Nasdaq trend was too strong and eventually (before the close) had to pull it down, and it came down hard over the next day or two. So there are many, many factors and ways to read the divergences, but there are some consistencies and probabilities...