George C. Lane developed the Stochastic Oscillator in the late 1950s. The Stochastic Oscillator is a momentum indicator that illustrates the location of the current close relative to the high/low range over a set number of periods.
The Slow Stochastic charts the daily stochastic as well as a five-day moving average of a 12-day interval period. This smoothing of the Stochastic Oscillator is an attempt to reduce volatility and improve signal accuracy. Values are less than 20 signal a buying opportunity and values greater than 80 indicate a selling opportunity.
Chart courtesy of Prophet Financial Systems (www.prophet.net)