This document discusses four common technical indicators used to analyze financial markets: the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Stochastic oscillator. It explains what each indicator measures, how it is calculated, and what typical signals and patterns traders look for like divergences, crossovers, and overbought/oversold levels. Examples are shown of how these indicators can be combined on a daily chart of the S&P 500 index.

1. Technical Analysis
- Standard Oscillators
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2. Agenda
• What are oscillators?
• Relative Strength Index (RSI)
• Moving Average Convergence/Divergence
(MACD)
• Stochastics
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3. What are oscillators?
• A mathematical tool to assess market moves
• Compared to Moving Averages and other indicators,
which are applied on the chart, the oscillators are
separate and give an index to measure market
conditions from an overbought/oversold,
divergence/convergence perspective
• Good for identifying potential reversals and have
historically proven most successful when markets are
trading sideways, without a clear trend.
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4. Relative Strength Index (RSI)
• Developed by Welles Wilder and first published in 1978
• The RSI is a momentum indicator which compares the average price
change of the advancing periods with the average change of the declining
periods.
• Useful in both short and long term analysis, but standard criteria are set
different
• Standard formula:
𝑅𝑆𝐼 = 100 −
100
1+𝑅𝑆
, 𝑤ℎ𝑒𝑟𝑒
𝑅𝑆 =
𝐴𝑣𝑔 𝑜𝑓 𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠′ 𝑢𝑝 𝑐𝑙𝑜𝑠𝑒𝑠
𝐴𝑣𝑔 𝑜𝑓 𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠′ 𝑑𝑜𝑤𝑛 𝑐𝑙𝑜𝑠𝑒𝑠
This will give us an index ranging from 0-100, making it possible to assess
possible divergence or if an instrument is oversold/overbought
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5. Relative Strength Index (RSI)
1. Oversold – market corrects higher
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6. Relative Strength Index (RSI)
1. Oversold – market corrects higher
2. Overbought – market corrects lower
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7. Relative Strength Index (RSI)
1. Oversold – market corrects higher
2. Overbought – market corrects lower
3. Divergence – price moves opposite of
indicator
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8. MACD
• Developed in late 1970s by Gerald Appel
• Built on several exponential moving averages and applied for both trend-
following and gauging of momentum.
• Compared to the RSI, the MACD fluctuates around zero, not indexed and is
not as useful as the RSI as identifying overbought/oversold levels.
• Consisting of a so-called MACD-line and a signal line (and a histogram
showing the difference between the two):
Standard Parameters: MACD-line: (12-day EMA – 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram: MACD Line – Signal Line
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9. MACD
Signal Line
MACD Line
MACD Histogram (MACD Line – Signal Line) 9NSFX Trading Desk

10. MACD
1. Line crossovers
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11. MACD
1. Line crossovers
2. Bullish Divergence (convergence)
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12. Stochastic Slow
• Developed in the late 1950s by George C. Lane
• Shows location of the close relative to a high-low range over
an interval and follows the momentum of the price action.
• Good for finding reversal setups as well as
overbought/oversold situations.
Formula: %𝐾 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐶𝑙𝑜𝑠𝑒 −𝐿𝑜𝑤𝑒𝑠𝑡 𝐿𝑜𝑤(𝑛)
𝐻𝑖𝑔ℎ𝑒𝑠𝑡 𝐻𝑖𝑔ℎ 𝑛 −𝐿𝑜𝑤𝑒𝑠𝑡 𝐿𝑜𝑤 (𝑛)
∗ 100
%𝐷 = 3𝑑𝑎𝑦 𝑆𝑀𝐴 𝑜𝑓 %𝐾
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13. Stochastic Slow
%K
%D
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14. Stochastic Slow
1. Overbought/Oversold
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15. Stochastic Slow
1. Overbought/Oversold
2. Crossovers
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16. Stochastic Slow
1. Overbought/Oversold
2. Crossovers
3. Convergence/Divergence
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17. Example - MACD, RSI & STOCHS
Combined on the S&P Daily
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