A momentum technical indicator that attempts to determine overbought and oversold conditions.
In the April, 1985 issue of Technical Analysis of Stocks and Commodities magazine Larry Williams stated,
“The trouble for most oscillator workers was, and has continued to be, that while frequently oscillators lead sometimes they lead far too early and, instead of buying a bottom, you are buying falling daggers and getting sliced up. Even the best oscillators consistently give premature buy and sell signals.”
The Ultimate Oscillator combines the weighted sums of price action from three different n-periods of time to create an oscillator that ranges from 0 to 100. Values of 70 and above are considered to be overbought while values of 30 and below are considered to be oversold. The time frames typically used for the Ultimate Oscillator are 7 periods (short-term), 14 periods (intermediate-term), and 28 periods (long-term). It’s important to note that these time periods overlap each other. In other words, the 28-period time frame encompasses both the 14-period time frame and the 7-period time frame.
The Ultimate Oscillator on the EUR/USD Daily Chart on 3/18/2011
Source: VT Trader
