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

To: Robert Ague who wrote (900)	5/10/1999 11:08:00 PM
From: Wayners	Read Replies (1) \| Respond to of 927

The stochastic is basically measuring where in the range between the high and the low the close falls. Repeated closes nearer to the high than to the low from one price bar to the next makes the stochastic move up from 20 to 80. Often in downtrends, price will consolidate within a range. During this consolidation, price hardly goes up at all, but you might see prices often close in the high end of the range. The value of the stochastic goes up from 20 to 80, and price has really hardly moved up at all from one bar to the next. Each bar, the stock is gapping down, but closing fairly high in the range. In uptrends, price will often close at the high end of the range. It doesn't take long for the stochastic to go from 20 to 80. But an interesting thing happens in an uptrend. The stochastic stays above 80 for a long period of time before reversing. The majority of the actual price move occurs while the stochastic is above 80. If you were to sell when it first gets up the 80 level, you would have gotten out way too early. The idea is to sell when the stochastics cross below the 80 level. The answer to your question is you can't really make the conversion between a future stochastic value and price, because its not just the price level that determines the stochastic value. The high and the low values are equally important and you don't know what you are going to get. Could be either of the above situations or something in between. You still have to use trendlines and support/resistance levels and other technical measurements. You really have to just sit back and see what you get a lot of times before the momentum starts to slow down unless you use trendlines and support/resistance levels.