Ultimate Oscillator

#momentum #oscillator #overboughtoversold 

Inventor: Larry Williams 

Larry Williams’ answer to the false divergences of single-period oscillators. It measures buying pressure across three timeframes at once – 7, 14 and 28 bars – and blends them with more weight on the shortest. Moves between 0 and 100. Its famous strength is the quality of its divergence signals. 

Default period: 7, 14, 28 

Above 50 indicates buying pressure winning overall. Below 50 indicates selling pressure winning. 

Useful readings: 

Above 70: Overbought zone 

Below 30: Oversold zone 

Crossing above 50: Pressure balance turned bullish 

Price makes new low but oscillator holds higher: Bullish divergence across three timeframes, high quality 

Price makes new high but oscillator lower: Bearish divergence, rally hollow 

Williams’ own rule: the divergence plus a breakout of the oscillator’s high is the real buy signal 

Objective rules: 

Bullish: Bullish divergence forms (price lower low, oscillator higher low with the low under 30) AND the oscillator then breaks above its high made during the divergence. 

Bearish: Bearish divergence forms (price higher high, oscillator lower high with the high above 70) AND the oscillator then breaks below its low made during the divergence. 

Simple version bullish: Oscillator crosses above 50 

Simple version bearish: Oscillator crosses below 50 

Long exit: Oscillator crosses above 70 and turns down 

What makes it unique: 

It blends three timeframes into one buying-pressure reading to kill the false divergences of single-period oscillators. Williams’ three-step divergence signal remains its unmatched signature. 

The indicator table value in TradePoint & RZone also provides you with a list of all values of this indicator for any group of stocks. This will allow you to compare the readings of this indicator across different stocks.

This indicator is also available in the System Builder of RZone & TradePoint for all charting methods. Using the system builder, you can develop various strategies based on the different conditions already present in this indicator. Additionally, it can be used with other indicators or price patterns to develop effective trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.

The indicator is applicable to all types of charting. Calculated based on the number of columns on P&F charts, bricks on Renko charts, lines on Line-break charts, candles on Heikin ashi charts, and lines on Kagi charts. While the formula and reading of the indicators remain the same, they become more dynamic on these charts.