Yep! You read that right, this is the Ultimate Oscillator What makes it so ultimate? It was first created by Larry Williams, who is an American stock and commodity trader and (fun fact) the father of famous actress Michelle Williams. Say whaaa!
The Ultimate Oscillator (UO) helps traders capture momentum while seeing the 7, 14 and 28 period market trend all at the same time. When using the 7, 14, and 28 day period the Ultimate Oscillator defines them as short, medium and long-term periods to receive a more accurate sentiment in the market. Williams felt this was better for traders to use then a single oscillator. Where as with just monitoring the 14 day period it might become positive too soon and before it can advance any further a bearish divergence will occur and overbought levels are reached while the price continues to be bullish.
Here is what the Ultimate Oscillator looks like on a one hour chart:
When using the Ultimate Oscillator in your trading its important to know that when the oscillator falls to the level of 30 or below the stock is at a good buy-in price. When the oscillator crosses above 60 we are in the sell territory.
Here is the same chart we used above but I've pointed out the good buy and sell points based off the Ultimate Oscillator, which does a fantastic job of pointing out the oversold and overbought territories on this one hour chart.
Looking at this chart we can see there are three (possibly four) buying periods in this three month period. Each of these buy periods leads to a great multi-day swing trade, which, for option-traders can be very lucrative. Our first buy around October 11th allows us to capture nearly a $3.00 stock movement. This will result in more than a 100% option gain.
As you can see, this is a pretty sweet swing trading strategy if you are going long on a stock you love. For instance, let’s say you believe a Biopharma. stock is going to have positive phase 3 trial results in the summer and so you take a nice long position in January. From January to the summer you can comfortably buy in and out, swing trading, knowing that if you get stuck long you’re still waiting on the results of the summer trial.
There are many ways you can utilize Ultimate Oscillator to your advantage especially when timing the entries and exits.
Be sure to let us know what you think of the Ultimate Oscillator and whether or not you use it in your own research.
Good Luck and Happy Trading!