Two of the Greatest Momentum Oscillators

Fear and greed are the greatest tools a trader can use.

If I spot fear raging out of control in a stock, I want to know exactly when that fear is likely to dissipate. Or, if I find a trade where buyers are tripping over one another with greed, I want to be aware of it.  That’s because if I can spot where either is out of control, the easier it is for me to make money. 

The question is – how can I do that?

Quite often, I’ll refer to several momentum indicators to spot that.  But two of my favorite “spotters,” if you will are Relative Strength (RSI) and Williams’ %R.  Better yet, if these two agree with one another in oversold or overbought territory, my odds of potential success begin to rocket.


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Take a look at Lowe’s Companies (LOW), for example.

In late July 2017, the stock was rocked by news that Amazon would begin to sell products from Sears Holdings.  The idea was that Amazon could be looking to get in on the home appliance space, where companies like LOW flourish.

Fear was out of control.  The stock plummeted from $76 to $71.  Millions of dollars were wiped out in a single day.  All traders had to do was wait for the fear to dissipate to begin buying again.  And all they had to do was wait for two essential indicators to say, “all is clear.”

When RSI dips to or below its 30-line, we have an oversold situation that’s likely to correct, near-term.  Then again we never want to rely on one indicator.  That’s a great way to lose money in a hurry.  So we begin to confirm with W%R.

When W%R reaches its 80-line, we have an oversold situation.

What makes the two of them most powerful is when they agree with one another.  For days after the two agreed, shares of LOW not only refilled the bearish gap at $76, it ran as high as $78.42 – a $7 gain yours for the taking just by watching fear.

Even in early August 2017, we could use the same indicators to pinpoint what was quickly becoming excessive greed.  At double-top $76 resistance, RSI began to pivot lower with W%R above its 20-line.

We can literally trade the same stock over and over and over again just by watching these two indicators alone.  It’s why they’re two of my favorites.


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Apply What You've Learned and Get Paid To Trade! Learn How Here