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Pullbacks scan

Stochastic Oversold Screener

This scan finds stocks whose Stochastic %K (14) is below 20, which traders call oversold, while the price is above the 200-day moving average.

Run this scan in the live demoFree, no sign-up. The demo uses made-up sample data.

The exact rule

Type this in Chalni: stochastic k below 20 and close above 200 day sma

  1. Stoch %K(14) < 20
  2. Close > SMA(200)

Find US stocks where Stochastic %K (14) is below 20; and the closing price is above the 200-day simple moving average.

Formula view
stoch_k(14) < 20
AND close > sma(close, 200)
Example chart: Stochastic dip in an uptrendDaily candles of a made-up sample stock with 200-day SMA; Lower panel: Stochastic %K (14), dotted lines at 20 and 80. The shaded day is the day the scan fired.
  • 200-day SMA
  • Lower panel: Stochastic %K (14), dotted lines at 20 and 80
  • Shaded day: the scan fired
Example from Chalni's made-up sample market, not a real stock. It shows the most recent time this scan fired in the sample US market, picked whether or not the trade worked.

What it means

The stochastic oscillator, made popular by George Lane in the 1950s, shows where today's close sits inside the range of the last 14 days. A reading of 0 means the close is at the lowest point of that range; 100 means the highest.

Below 20, the stock is closing near the bottom of its recent range. In a long-term uptrend, that often marks a short-term dip rather than real weakness.

How traders use it

  • Wait for %K to turn back up through 20 before buying, as a sign the dip is ending.
  • Combine it with a support level, such as the 50-day average, for a cleaner setup.
  • Use a stop under the recent low.

Watch out for

  • Oversold can stay oversold in a strong downtrend. The 200-day rule helps, but it does not remove the risk.
  • The stochastic moves fast and gives many signals. Expect noise.

Test it before you trust it

Every scan in Chalni sits an exam. First it runs on older data, the practice: each time it picks a stock, the stock is held for 10 trading days and 0.2% is paid in costs. Then it runs on newer data it has never seen, the exam. A scan that only works in practice has just memorised the past.

See the practice and exam results for this scan in the demo (on sample data; real data comes at launch).

Questions

What does a stochastic below 20 mean?

The stock closed near the low end of its 14-day range. Traders call it oversold, but it is not a buy signal by itself.

What are the standard stochastic settings?

14 periods for %K and 3 periods for the %D signal line. This scan uses %K (14).

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