CompanyGraph
Measures where the current close sits within the 14-period high-low range, exposing whether price is compressed toward the top or bottom of its recent trading envelope.
Stochastic %K compares the current close to the high–low range over the last 14 periods. High values mean price is near recent highs.
Stochastic %K compares the current close to the high-low range over the last 14 periods. High values mean price is near recent highs.
The calculation:
%K = ((Close - Lowest Low) / (Highest High - Lowest Low)) × 100 Where: Lowest Low and Highest High are over 14 periods
Interpreting %K values:
- %K > 80: Overbought territory; price near top of range
- %K < 20: Oversold territory; price near bottom of range
- %K = 50: Price at middle of recent range
Trading applications:
- Overbought/oversold: Extreme readings can indicate reversal potential
- Momentum gauge: Shows where price sits within its recent range
- Crossovers: %K crossing %D generates trading signals
- Divergences: Price/stochastic divergences warn of potential reversals
Important considerations:
- Fast vs. slow: Raw %K is "fast"; smoothed version is "slow" stochastic
- Trending markets: Can stay overbought/oversold for extended periods
- False signals: Works best in ranging markets; less reliable in trends
- Confirmation needed: Combine with other indicators for better results
The stochastic oscillator is popular for identifying potential reversal points, particularly when combined with support/resistance levels and trend analysis.
Where it fits
Stochastic %K (14)→Momentum