Sell Signal
- Overbought Area: The Ultimate Oscillator must have reached overbought status (above 70), before a sell signal can be given.
- Bearish Divergence: When price makes a new high, but the Ultimate Oscillator makes a lower high.
- Ultimate Oscillator Breakout: When the Ultimate Oscillator closes below the lowest low during the bearish divergence.
When both 1, 2, and 3 occur, then a sell signal is given. An example is given below in the chart of the E-mini Russell 2000 Futures contract:
In the chart above of the Russell 2000 emini future, price broke support and consequently crashed downwards with a very large bearish red candle.
The Ultimate Oscillator is a very effective tool for showing overbought and oversold conditions, divergences, and buy and sell signals. Other oscillators to investigate are Stochastics (see: Stochastics) and Relative Strength Index (RSI), (see: Relative Strength Index).
