The Ultimate Oscillator chart reacts to the accumulation and distribution of the asset over short, medium, and long-term periods. Due to this multi-timeframe setup, the Ultimate Oscillator chart exhibits lower volatility than similar momentum indicators, and thus many traders feel this results in fewer invalid signals being displayed.
Our Ultimate Oscillator chart incorporates market data from our proprietary data warehouse and displays it as a line graph chart with a scale of zero to 100, illustrating the price momentum of the asset.
The position of the oscillating line on the chart can aid you in identifying whether the asset is regarded as underbought or overbought. When the reading is at 30 or below, it signals underbought, increasing the possibility of a price reversal to the upside. When the reading is at 70 or above, it signals overbought, increasing the possibility of a price reversal to the downside.
A trend reversal may be confirmed by the Ultimate Oscillator when it shows a divergence, where an asset’s price moves one way and the oscillating line does not move in a similar direction. This may help traders decide their next move.
For example, a bullish divergence occurs when an asset’s price chart makes lower lows but the Ultimate Oscillator does not show lower lows. Traders may consider taking an entry position if the Ultimate Oscillator reading is below 30 when this occurs and it then rises above the divergence high.
Conversely, a bearish divergence occurs when an asset’s price chart makes higher highs but the Ultimate Oscillator does not show higher highs. Traders may consider taking an exit position if the Ultimate Oscillator reading is above 70 when this occurs and then descends below the divergence low.