Stochastic
Momentumdraws in its own pane
Where the close sits inside the recent high-low range, 0–100. Reads a pullback's depth against the range rather than against an average.
On this chart: 14 periods, %K smoothed 3, %D 3.
What it measures
The stochastic asks: within the highest high and lowest low of the last 14 bars, where did today close? Closing at the top of the range reads 100, at the bottom 0. The %K line is that reading smoothed over 3 bars; %D smooths %K again and acts as its signal line.
How to read it
Below 20 the stock is closing near the bottom of its recent range; above 80, near the top. %K crossing %D from below, down at the low end, is the classic marker that the range position is turning.
Like RSI, a strong trend can pin it: a stock grinding higher closes near its highs every day, and the stochastic stays above 80 the whole way. Pinned-high is what a persistent uptrend looks like, not a malfunction.
Using it on the wheel
A low stochastic on a name in an intact uptrend describes a pullback-within-trend — the setup where cash-secured put conditions tend to score well, because premium is elevated while structure is undamaged.
Like everything in this guide, these are descriptions of conditions and reference levels — context for your own decisions, not instructions to trade.