Momentum Signals Workflow
OBJECTIVE: Assess momentum health and identify potential reversals.
Step 1: Get Stochastic Readings
- •Use
stochastic_analysis_toolfor current %K and %D values - •Default settings: K=14, D=3
Step 2: Classify Zone
- •OVERBOUGHT: %K > 80 (price may be extended, watch for reversal)
- •OVERSOLD: %K < 20 (price may be depressed, watch for bounce)
- •NEUTRAL: 20 < %K < 80 (no extreme)
Step 3: Check Crossovers
- •BULLISH CROSSOVER: %K crosses above %D (buy signal)
- •BEARISH CROSSOVER: %K crosses below %D (sell signal)
- •NO CROSSOVER: Watch for setup
Step 4: Divergence Check
- •BULLISH DIVERGENCE: Price makes lower low, but %K makes higher low
- •BEARISH DIVERGENCE: Price makes higher high, but %K makes lower high
- •These are powerful reversal signals
Output Format
Stochastic: %K={value}, %D={value} Zone: [OVERBOUGHT/OVERSOLD/NEUTRAL] Signal: [BULLISH CROSSOVER/BEARISH CROSSOVER/NONE] Divergence: [YES - TYPE/NONE DETECTED] Interpretation: [Actionable assessment]