A stochastic oscillator is a technical momentum indicator that is based on the location of the current close relative to the high and low price within a specific range. Many traders erroneously believe that a high stochastic reading (i.e., "overbought") is a bearish signal, and that a low stochastic reading (i.e., "oversold") is actually bullish because such overbought and oversold conditions are likely to reverse. Not so. While these extreme stochastic readingscan indeed lead to price reversals, they are actually reflective of strong momentum, not an impending reversal. There is much to know about stochastics, and this series of videos will help you understand this important momentum indicator.

Chart of the Day August 5th, 2013

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