Why Full Stochastics Should be an Essential Part of Your Research

July 17, 2019, By smallcapfirm,

Fear can destroy a stock in seconds.

But it can also lead to quite a bit of opportunity.

Look at Glu Mobile (GLUU) for example, mid-2019.  In May 2019, the stock plummeted on mixed results and guidance that left investors underwhelmed to say the least.

Uncertainty and fear sent the stock screaming lower.

However, several indicators told us the stock had become far too oversold, far too fast. For example, take a look at what happens to the stock up to 80% of the time when it touches its lower Bollinger Band (2,20). Not long after, the stock bounces.

Then, notice what has historically happened when the lower Band is hit, and RSI hits or penetrates its lower 30-line. The stock bounces. We can confirm again with MACD. We can also confirm with Williams’ %R (W%R). Each time this indicator dips to or below its 80-line, and confirms the other oversold indicators, the stock bounces.

However, there’s another indicator many technicians rely on as well.

Full STO: Full Stochastics

Full Stochastics uses the features of Slow and Fast Stochastics.

It combines %K, or the slow stochastic that looks at current value. It also combines, %D, which is equal to a three-period moving average of %K. We use them to compare a closing price of a stock to a range of prices over a set period of time.

While it sounds difficult to use, all we’re looking for is what is shows us as far as overbought and oversold conditions. For example, you’ll notice that when Full STO drops to or below its 20-line, that typically marks the bottom. When Full STO pushes to or above its 80-line, we have an overbought condition.

Notice what happens when Full STO agrees with the other technical indicators on this chart of GLUU.  Again, about 80% of the time, we’ll see a reversal in the opposite direction.  Use Full STO the next time you’re trying to spot opportunity.

It may just lead to you next successful trade.

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