Stochastic %K (14)

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.