TA discussion, page-5546

I mentioned in the previous post that I thought that Alexium was oversold. When analysing overbought/oversold conditions the Stochastic Oscillator is a useful tool because it is in common use by swing traders and can give an insight into what traders might be thinking.

The Stochastic typically uses overbought and oversold thresholds of 70 and 30 respectively although in some cases 80 and 20 is also used the lift the bar somewhat. Over the years I have found that when the trace overshoots comparatively to more extreme highs or lows and in this case oversold lows then a reversal is often not too far away.

Of course it can never be 100% right but it is a useful early warning. You will note on this weekly chart that the Stochastic has hit a swing point low level not seen in close to a couple of years (blue line).

Weekly Stoch 8/3/3