A technical indicator that compares where a security's price closed relative to its price range over a given time period. The sensitivity to market movements can be reduced by adjusting the number of time periods or by taking a moving average of the result. This indicator is calculated by using the following formula:

%K = 100[(C – L14)/(H14 – L14)]


C = the most recent closing price
L14 = the low of the 14 previous trading sessions
H14 = the highest price traded during the same 14-day period.




The theory behind this indicator is that, in an upwardly trending market, prices tend to close near their high. Whereas, during a downward trending market, prices tend to close near their low. Transaction signals occur when the %K crosses throgh a 3-period moving average called the %D.

Thats all greek to me. As many of you may know this is one of my favorite indicators. Almost every chart I post has a reference to the stochs. I look for trends where the stock has bottomed and sold off at before. I look for the crossover for a change in the current trend and a possibe entry point. But again there are other factors before I just pull the trigger.

Lets take a look at microsoft. I bought microsoft on monday and sold thursday. I didn't make a lot of money but I made some. MSFT was an easy call so plese check out the chart and it shows you what I am talking about. If you want to look at a similar chart check out NOK nokia.

http://tinyurl.com/ch96g