Thread by @asitbaran

Strategy based upon Weekly & Daily Stochastic -- >

Stochastic oscillator is a momentum indicator that shows the location of the close relative to the high– low range over a set number of periods. It is used to generate overbought and oversold trading signals, utilizing a

2. 0-100 bounded range of values. Stochastic oscillators are sensitive to momentum rather than absolute price. Traditionally, readings over 80 are considered in the overbought range, and readings under 20 are considered oversold. However, these are not always indicative of

3. impending reversal. The Daily Stochastic is a 3-day simple moving average of the 14- day %K. The Weekly stochastic is a three-day simple moving average of the 70-day %K, which is the equivalent of 14 weeks (14 weeks × 5 trading days per week). So we would use the current

4. close highest high over the last 70 days, and lowest low over the last 70 days. Generally, the weekly (70-day) stochastic defines the medium-term trend. Transaction signals are created when the %K crosses through a three-period moving average, which is called the %D. The

5. "fast" stochastic indicator is taken as %D = 3-period moving average of %K. The weekly & daily stochastic is different in that it shows the location of the close relative to the high–low range for two different periods.

Because price is thought to follow momentum,

6. Stocha above Stocha Average is Bullish whereas Stocha below average is bearish. Notice to be taken whenever the first time crossover happens, and also note to be taken the placement of the weekly Stocha..

7. intersection of these two lines (D VS W) is considered to be a signal that a reversal may be in the works, as it indicates a large shift in momentum from day to day

A combination of weekly and daily stochastics can be used to identify long or short trade opportunities

8. An oversold reading on the weekly stochastic in an uptrend can signal a potential correction or trend reversal, and an overbought reading on the weekly stochastic in a downtrend can also signal a possible trend reversal. Weekly Stocha can act as a Support and Resistance.

9. Let’s have a look at Aug where Weekly Stocha was Oversold (below 20), BN was at 26K. Daily Stocha took support there and the UpMove took it to close to 30K. What it says that when both D&W are in oversold region, we can expect an UpMove. And when we have both of D&W in

10. overbought region (Over 80), we saw a correction from 30K TO 27K. So, when both D&W are in oversold region look for a Upward reversal and when both of them in Overbought region look for a downside reversal

11. 2nd observation is when Weekly RSI > 50 (or cutting above 50) its bullish. And when it’s going below 50 (cutting below <50) its bearish.

The final observation is when Daily is crossing above (Bullish) or below (Bearish) Weekly. Which is my favourite setup.

The settings on

12. the W&D stochastic will depend on personal preferences, trading style, and timeframe

Look for consensus between both timeframe for better result. And can be used simultaneously with MACD strategy I discussed last week.
So, you know where to long options for positional play