"Stochastics"? "Bearish signal"? "Oversold"? What does this mean?

Stochastic is usually just a fancy word for random.

Bearish means not much momentum (as a hibernating bear) as opposed to bullish (charging headlong).

That’s all I’ve got.

* Stochastic oscillator: an indicator that shows momentum by looking at support and resistance levels.
* Support/resistance levels: These are psychological barriers the stock hits. Support is when it won’t fall further and resistance is when it won’t go higher.
* Bearish signal: Things aren’t looking good…
* %K and %D: These are the short names for the slow and fast stochastic indicators respectively. These two stochastic oscillators are used together (and graphed together).
* Critical value of 20 / oversold: In this graph you will see there are two gray lines at the top and bottom. At 80 the stock is considered overbought and at 20 is considered oversold.
* Downside momentum: Yeah. There’s no such thing as a free lunch so if I’m honest I don’t really know what this means.

I used to be really into economics and stocks/options. I almost double majored in computer science and economics.

Bearish means the price is going down. Bad if you own the stock.

But then they say “however” and that the stock is oversold. That means that they think that too many people have sold off their stock… that’s the downside momentum. Their opinion is that the stock’s price is actually lower than it should be.

In short, the recommendation is that you should hold or even buy the stock right now.

@Buttonstc Bearish suggests that the prices/values of a stock or all stock are going down and people are selling to keep some of their investment. The opposite, a bull market suggests prices are going up and people are buying, hoping to sell at a higher price.

investopedia.com is a great resource! :D

Which is the only thing I think I got right here!

I’m pretty sure it means that predicting the stock market is no better than spinning a roulette wheel.

You guys, I am so impressed. Especially by you two, @timtrueman and @aprilsimnel. You have me believing that this is a meaningful utterance. Thank you for the interpretation. I even mostly understand it.

Truly, the trick is in knowing the jargon and the terms of art. I am about as ignorant in this field as a reasonably well educated person can be. Just like becoming a parent, you don’t have to pass a test to become an owner of stock. It’s OJT for me.

@aprilsimnel I’m sorry but your %K, %D and critical value definitions aren’t right (at least in the context of the question). And you described but didn’t define oversold. Don’t take it personally I just want to make sure nobody gets confused.

@timtrueman – Out with the bad, then! :D

Now it says this:

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Stochastics

The Stochastic Oscillator is registering a strong bullish signal as the %K has crossed above the %D and the oscillator recently moved above the critical value of 20 and is no longer oversold.

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Do actual people write these things, or are they computer-generated to a formula using defined variables?

I didn’t understand this in the original question: “the recent downside momentum is not sustainable.” How can a decline not be sustainable?

@Jeruba, it’s supply & demand. The stock still has some value.

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Everyone got the news that the company had problems. So then, everyone started selling their stock. That increased the supply of that particular stock on the market.

So its price goes down (bearish).

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Thing is, that stock isn’t worthless. It still has value, but with so many people selling it at the same time, the price of the stock slid below its theoretical value.

At that point, it was considered oversold.

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People figured that out, or followed the advice of the agent you reference here, and started buying the stock (or holding it) instead of selling it.

Now demand has come back into equilibrium with supply (between the 20 and 80 critical values). The stock is no longer oversold.

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You can, of course, buy the stock at this point if you want. The only thing is that now it’s not quite as good a deal as it was before. The price is higher for one (bullish). And being closer to equilibrium, the price could go up, but also again might go down. So the risk is higher, too.

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And yes, people use technical jargon to ensure that their precise meaning is understood by fellow experts. Happens all the time.

Try talking about “lurving a jelly” sometime with a friend who’s not on Fluther.

Thanks, @robmandu. That was great.

I’ve been in or around the computer biz since 1970 and understand the point of jargon. It’s partly for precision, yes, and it’s also partly a shibboleth. It bothers me only when someone uses it indiscriminately to the uninitiated without defining the terms. I see this especially in education and medicine, where you’d think they’d remember that it’s their job to deal with laymen.

Agreed!