Williams %R is a powerful technical analysis tool used to spot overbought and oversold conditions.
This oscillator is just one of the 20+ technical analysis tools accessible to MarketClub members on our customizable charts.
This momentum indicator, developed by Larry Williams, compares the current closing price to the high and low of a certain period of time, normally 14 days.
The Williams %R helps identify overbought and oversold conditions and can be used to find entry and exit points.
What is Williams %R?
While similar to the Stochastic Oscillator, Williams %R uses a negative scale and oscillates between 0 and -100. The indicator will typically have levels marked at -20 and -80, as well as a midpoint at -50.
If the current closing price is near the top of the high-low range, the indicator will read closer to 0. However, if the current closing price is near the bottom of the high-low range, the indicator will read closer to -100. A closing equal to the high of the high-low range will read 0.
Overbought and Oversold
Using the default period of 14, readings from 0 to -20 are considered overbought. Readings from -80 to -100 are considered oversold.
It is important to remember that markets in strong uptrends can become overbought and remain overbought, indicating sustained buying pressure. Conversely, markets in strong downtrends can become oversold and remain oversold, indicating sustained selling pressure.
Using the Midpoint
The midpoint of the Williams %R is an important level to watch. When the indicator moves above -50, it indicates that prices are trading in the upper half of the high-low range for the given period. This could mean the market is strengthening.
On the other hand, when the indicator moves below -50, it indicates that prices are trading in the lower half of the high-low range for the given period. This action could mean further weakness.
Learn More Technical Analysis Strategies
Williams %R is just one of many technical analysis tools. Technical analysis uses stock charts, trading volumes, and other day-to-day market data to find trends and gauge overall investor sentiment about a stock.
Applying this analysis to your research methodology can help you pinpoint the best buying opportunities and avoid costly mistakes.
Learn more about technical analysis strategies and analysis.
It’s important to note that technical indicators aren’t perfect analytical tools. You should always take care to use more than one indicator before determining if a stock is headed up or down.
MarketClub members can find this study in the Below-Chart Studies list in your customizable charts.
Join MarketClub to test our charts and use the Williams %R.