The stochastic oscillator and the moving average convergence divergence (MACD) are two indicators that work well together.
The stochastic oscillator compares a stock’s closing price to its price range over a period of time. Its K line indicates the number of time periods, and its D line is the moving average of the K line. When the K line drops below 20, the stock is oversold, and it indicates a buying signal. If the K peaks just below 100 then retreats, the stock should be sold before the value drops below 80. And generally, when the K value rises above the D, it’s a buy signal as long as the values are below 80. If they are higher than 80, the security is overbought.
MACD indicates price trends and direction. Subtract a security’s 26-day exponential moving average from its 12-day moving average to create an oscillating indicator value. The trigger line is the nine-day EMA.
If MACD value is higher than the nine-day EMA, it’s a bullish moving average crossover. A bullish signal occurs when a faster moving average crosses above a slower moving average, creating market momentum and signaling more price increases.