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Chart signal with stocks near all-time highs

Key takeaways

  • Williams %R is a momentum chart indicator.
  • It can be used to generate short-term buy and sell signals.
  • This indicator may suggest stocks could run into resistance.

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).

Source: Active Trader Pro, as of February 15, 2024.

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.

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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.

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Past performance is no guarantee of future results.

Views and opinions expressed may not reflect those of Fidelity Investments.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

Technical analysis focuses on market action — specifically, volume and price. Technical analysis is only one approach to analyzing stocks. When considering which stocks to buy or sell, you should use the approach that you're most comfortable with. As with all your investments, you must make your own determination as to whether an investment in any particular security or securities is right for you based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.

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