WEBVTT 00:03.550 --> 00:12.490 In this video, the sarcastic oscillator, so sarcastic oscillator is another oscillator that is in 00:12.490 --> 00:15.730 its own window, and I'll go ahead and pop that up here. 00:17.060 --> 00:23.630 Basically, what it does is it measures a couple of moving averages and whether we are overbought or 00:23.630 --> 00:27.170 oversold, so it's a lot like the RSI. 00:28.680 --> 00:34.560 We have above 80 and a crossover gives you an overbought signal. 00:35.640 --> 00:39.330 Below 20 and a crossover gives you an oversold signal. 00:41.060 --> 00:43.810 There is price divergence, and I'll walk through that as well. 00:44.900 --> 00:50.330 However, there's a caveat with Stochastics as they are horrible in a trend. 00:51.260 --> 00:52.310 And they are. 00:53.510 --> 00:59.960 Much more reliable in a range bound market, because the idea is that all things being equal over the 00:59.960 --> 01:05.810 last X amount of periods, in this case 14, there's a high and a low and you just kind of bounce back 01:05.810 --> 01:06.260 and forth. 01:07.070 --> 01:10.280 The reality is markets do consolidate. 01:11.300 --> 01:16.010 Depending on the market, anywhere from 70 to 80 percent of the time, so the stochastic oscillator 01:16.010 --> 01:20.330 is a good indicator, you just have to make sure you're using it at the right time. 01:21.750 --> 01:26.990 So what I will do, a lot of traders will do this is they'll put a moving average up. 01:27.720 --> 01:34.590 This is a 50 day amay and you can see that it's drifting slightly lower here, but it's more sideways 01:34.590 --> 01:35.640 than it was here. 01:36.270 --> 01:37.580 So what does this tell us? 01:37.620 --> 01:42.090 This tells us that we will get a lot of false signals out of this, the Catholic in this uptrend. 01:42.570 --> 01:47.760 But once we become a little bit more range bound and you can clearly see that there's a couple of areas 01:47.760 --> 01:52.110 that were trading between somewhere around 145 and maybe 130 or so. 01:54.890 --> 02:00.170 Now, you can start to use this to Catholic oscillator and you'll see that the moving averages crossed 02:00.170 --> 02:05.360 over in the overbought area right at the top, we crossed over here. 02:05.360 --> 02:10.370 And that's technically not a buy signal because. 02:11.450 --> 02:13.190 It wasn't underneath the 20. 02:14.500 --> 02:19.900 There's one here, and you can see that's when we started the consolidation at that point, you can 02:19.900 --> 02:22.830 see that the EMA was starting to roll over, flatten out a little bit. 02:22.840 --> 02:26.110 So we've had to signal that this was awfully close. 02:26.140 --> 02:29.560 You could have perhaps been talked into it. 02:31.190 --> 02:37.040 But as you can see, technically, it's not there, so that sarcastic is a little slower than some other 02:37.670 --> 02:47.060 signals, our signal producing indicators, and that in and of itself can and will keep you out of trouble 02:47.060 --> 02:47.630 sometimes. 02:48.560 --> 02:52.520 So let's take a look at let's see let's do Ford Motor here. 02:52.520 --> 02:55.040 And you can see that we're in a trend. 02:56.830 --> 03:02.470 Even though we've popped above, now that we're sideways for this time frame, you can see that we just 03:02.470 --> 03:04.960 kind of went sideways for a few days and we crossed there. 03:04.960 --> 03:07.150 That technically was a cell signal. 03:08.500 --> 03:15.160 This was more or less a sideways market for a little while, at least based upon the moving average, 03:15.170 --> 03:18.070 and you can see that we did get the one signal. 03:22.660 --> 03:27.190 This area here, we got a signal here, we did cross over just barely. 03:31.690 --> 03:35.440 This is an excellent signal we crossed over right here. 03:36.470 --> 03:37.880 And we crossed right here. 03:38.860 --> 03:42.340 Telling you to either get out or go long, because you would have been short. 03:42.610 --> 03:43.840 This was a cell signal. 03:44.700 --> 03:50.550 And that was a closing signal because by then the moving average started to drift lower and you did 03:50.550 --> 03:51.510 make a fresh new low. 03:51.540 --> 03:59.910 So at that point, you have to assume that you're probably not going to continue much higher on the 03:59.910 --> 04:00.390 rebound. 04:01.970 --> 04:04.370 There is price divergence, as you can see. 04:05.450 --> 04:11.960 And that, of course, is a signal, so with the line going basically sideways, getting a little overboard, 04:12.050 --> 04:14.240 crossing over there makes sense. 04:14.990 --> 04:17.570 And we did, in fact, go lower over the longer term. 04:17.570 --> 04:20.840 And that's the thing about the stochastic oscillator that I would point out. 04:20.840 --> 04:25.790 When you do get price divergence, it tends to be a little bit more of a longer term signal by the very 04:25.790 --> 04:29.310 nature of the indicator itself. 04:29.720 --> 04:31.580 But again, you have to be very careful. 04:31.580 --> 04:35.500 You have to make sure that you're using it in a range bound market like this. 04:35.990 --> 04:37.640 You know, there's a cell signal there. 04:38.330 --> 04:40.310 There was a buy signal right before it. 04:40.550 --> 04:42.200 So a couple of decent trade. 04:43.240 --> 04:49.900 Most people will use these moving averages to give you an idea as to whether we are sideways. 04:50.170 --> 04:56.560 Another thing that, of course, helps is if you're at support and resistance and in an area that has 04:56.560 --> 05:04.570 too strong levels of support and another level of resistance to conflicting areas, typically you will 05:04.570 --> 05:05.920 have consolidation anyway. 05:05.920 --> 05:09.120 So that should get you looking at the stochastic as well.