Smooth Stochastic Interpretation:
The SMI gives good divergence signals.
A sell signal is given when a bearish divergence appears. A bearish divergence occurs when the stock price makes new highs while the smoothed stochastic fails to make new highs.
A buy signal is given when a bullish divergence appears. A bullish divergence occurs when the stock price makes new lows while the smoothed stochastic fails to make new lows.
When %k and %d are under the 20 level, there is a bullish signal, when %k rises above %d and when the two indicators rise above the 20 level. When %k and %d are above the 80 level, it is a bearish signal when %k falls below %d and when the two indicators falls below the 80 level.
Smooth Stochastic, %D or Stochastic slow Calculation:
The calculation of the %D is similar to the stochastic rapid but with the smoothing the signals are more regular. %D(y) = 100 * (H(y)) with H(y): sum of C - PH(n) on X days ago C days: today's close PB(n) day: Lowest on n period PH(n): Highest on n period n:period.
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