The Stochastic Oscillator (STOCH) is a range bound momentum oscillator. The Stochastic indicator is designed to display the location of the close compared to the high/low range over a user defined number of periods. Typically, the Stochastic Oscillator is used for three things; Identifying overbought and oversold levels, spotting divergences and also identifying bull and bear set ups or signals.
Stochastic Oscillator is used to find an overbought/oversold condition to generate a buy/sell signal using the default threshold of 20 for oversold and 80 for overbought. When %k line is 20 and below, a buy signal will be generated and if it is 80 and above, a sell signal is generated.
Stochastic Oscillator uses 14 period %k line and 3 period SMA for %D line. 80 overbought threshold and 20 oversold threshold.