Purely technical: Stochastics of 150 stocks show buy signals

NEW DELHI: The S&P BSE Sensex might be flirting with its crucial support level at 28,000 ahead of the expiry of August F&O series, but Stochastic oscillators of as many as 162 stocks gave buy signals on BSE with rising volumes.

The 30-pack index failed to hold above its crucial level of 28,000 recorded last week and it has been trading in a narrow range since then. Individual stocks have been on traders’ radar as the benchmark index continues to trade sideways.

Stochastics is a momentum indicator that uses basic support and resistance levels and integrates with the trend to give accurate buy or sell signals to traders.

Stocks that have given buy signals included Nitesh Estates, SpiceJet, Rasoya Proteins, Balaji Telefilms, Prabhat Dairy, Jain Irrigations, NHPC, ITC, Infosys, Wipro, Tech Mahindra and Crompton.


Momentum oscillators such as Stochastics can give clues to traders when the momentum slows down or picks up. It is measured with the %K line and the %D line. Traders should follow the %D line closely because that will indicate major signals on the chart.

A default period of the 14-day range is used to calculate Stochastic oscillators, which is commonly referred to as %K. If its value is 80%, then it means the security price is in the higher range of the closing price in a given period.

This Stochastic value, which is referred to as %K, is smoothed by applying the three-day moving average to generate buy/sell signals and this value is called as %D.

While using this indicator, the thumb rule is that when the faster Stochastic crosses over the slower moving one, it indicates a change in the short-term momentum and could be interpreted as a signal to buy.

On the other hand, when the fast-moving Stochastic crosses below the slower moving one, it indicates a drop in the short-term momentum and could be interpreted as a signal to exit or sell.

Trading with Stochastics is not that simple, but when used in tandem with other indicators and experience, good traders can make a lot of high probability trades using Stochastic.

Other indicators that can be used in tandem are MACD, RSI, ADX, and MFI.

For example, SpiceJet is trading near its oversold level, which is closer Stochastic value of 20. The fast-moving Stochastics crossed over from the slow-moving Stochastics on Tuesday. A crossover usually signals a change in trend. The value of the fast-moving Stochastic is 30.55, while that of slow-moving one is 23.51.

(The example given above is for illustration and not a recommendation to either buy or sell. Please consult your financial adviser before taking any position in the stock/s mentioned)