Stochastic Oscillator

The Stochastic Oscillator is a momentum indicator developed by George Lane that compares a security's closing price to its price range over a specified lookback period — typically 14 sessions — to generate a value between 0 and 100. It consists of two lines: %K (the fast line, showing where the current close sits within the recent high-low range) and %D (the slow line, a moving average of %K). Readings above 80 indicate overbought conditions — the price is trading near the top of its recent range — while readings below 20 indicate oversold conditions. Crossovers between %K and %D generate buy and sell signals — a %K crossing above %D from below 20 is a bullish signal, while a %K crossing below %D from above 80 is bearish. In Indian equity markets, the Stochastic Oscillator is widely used to identify entry and exit points in range-bound stocks and indices, and to spot momentum divergences where price makes a new high but the stochastic fails to confirm — signalling potential trend exhaustion.