Technical Indicator MEGA Reference Part 59b – Ultimate Oscillator Part 2 of 2

Ultimate Oscillator Sell Signals

  1. Overbought Area: The Ultimate Oscillator must have reached overbought status (above 70), before a sell signal can be given.
  2. Bearish Divergence: When price makes a new high, but the Ultimate Oscillator makes a lower high.
  3. Ultimate Oscillator Breakout: When the Ultimate Oscillator closes below the lowest low during the bearish divergence.

When both 1, 2, and 3 occur, then a sell signal is given. An example is given below in the chart of the E-mini Russell 2000 Futures contract:

A sell signal given by the Ultimate Oscillator would be strengthed by a trendline break of price. In the chart above of the Russell 2000 emini future, price broke support and consequently crashed downwards with a very large bearish red candle.

The Ultimate Oscillator is a very effective tool for showing overbought and oversold conditions, divergences, and buy and sell signals. Other oscillators to investigate are Stochastic and Relative Strength Index (RSI).

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