Stochastic is a way to show if a stock is overbought (above 80 on the chart) or oversold (below 20 on the chart).
Note the example. The Stochastic line is blue.
Look for confirmation of trend reversal if Stochastic is above 80 into a downward trend and enter or vice versa is the indication is below 20. Remember when a stock is in a trend it is most likely to continue. So wait for good indication before entering.
When Stochastic shows a stock has been
oversold
it may signal a good time to buy.
Also see how to use MAC-D indicators with Stochastic analysis.
The Mac-D Indication is shown above in brown. When it is crossing the axis it in neutral. When above overbought and when below oversold.
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