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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Stitch who wrote (5394)	8/5/1998 9:49:00 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 9980

I keep hearing that the market is oversold. Anyone know what the heck that means? Is there a ratio they watch? Stitch, I don't have a degree in technical analysis, but I have learned a little through osmosis. One of the most common ways to determine overbought and oversold levels is through a measure of price momentum called Stochastics. (Didn't think that word would get by the spell checker) The idea came from a Czechoslavakian mathematician. You can calculate the measure for any time period. A 20 day stochastic seems to be a common one. This would be calculated as follows. 100(last close-20 day low)/(20 day high-20 day low). This gives you a raw number which is usually smoothed by a moving average. (3 days is the one I see charted often) Overbought is usually defined as a number above 75 and oversold is below 25. Does it work? Don't ask me, I don't use them. -Robert