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  |  AUG 1987

Forecasting the market with the overbought/oversold indicator by Steven B. Achelis

Forecasting the market with the overbought/oversold indicator by Steven B. Achelis The terms ""overbought"" and ""oversold"" are often used to discuss market conditions. However, as anyone who has placed a short trade simply on the basis that the market is overbought knows, the market can remain overbought for long periods of time. There are a number of indicators which can be used to quantify overbought/oversold (OB/OS) conditions. Most methods deal with internal momentum as measured by changes in price. Popular price OB/OS indicators include the rate-of-change of prices (expressed in either points or percentages) and the difference between two moving averages (often referred to as MACD).

by Steven B. Achelis

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