The S&P 500 toppled 5,000 recently, despite some lingering inflation worries and other risks. Globally, stocks have mostly been on a roll to start 2024, extending the market's momentum from last year.
What do the charts say? Investors that use chart analysis might find the Williams %R technical indicator is nearing a sell signal.
What is Williams %R?
While not as widely used as other indicators such as moving averages, MACD, RSI, stochastics, and other technicals, Williams %R has many similarities to those—especially stochastics.
Williams %R measures the price of an investment or index relative to the highest high for a given period of time. It’s a momentum oscillator that ranges between 0 and –100. Essentially, readings between 0 and –20 are considered sell signals and those from –80 to –100 are considered buy signals. Additionally, a cross above the –50 level is considered a bullish signal and a cross below –50 is considered a bearish signal.
The top part of the following chart shows how stocks have been in an uptrend since mid-October 2023. The bottom part shows what the Williams %R indicator looks like (you can select Williams %R in Active Trader Pro® under the “indicators” dropdown menu).
Recently, Williams %R has approached –20, which if it crossed above that level a technical analyst might look at that as a sell signal. Back in January, the indicator crossed above the –50 line—a sell signal (which ended up not being accurate).
It’s worth noting that oscillators—including Williams %R—can remain in what is considered overbought or oversold ranges for extended periods of time.
The bigger picture
Of course, indicators like Williams %R should never be used in isolation to help you make trading decisions. It can be used in combination with other technical and fundamental data points to help form your outlook on an individual stock and on the overall stock market.