Ask Colin

What does it mean if Stochastic is oversold and RSI is overbought?

You have not said what period you are using for the two indicators. I suspect that you are using different periods for them. The reason that I say this is that they are both momentum oscillators, albeit that they measure momentum differently. If you have the same period for both, they will, not unexpectedly, tend to move in parallel in rough terms. It will be unlikely that one would be overbought while the other is oversold.

To illustrate this, chart the two indicators for the same stock using a period of 5 days for both. You should be able to see they are fairly similar.

If you have different periods for the two indicators, then it will be possible that one is overbought and the other oversold at the same time. All this means is that one is overbought in its time frame and the other is oversold in its different time frame.

This is analogous to RSI being oversold on a daily chart and overbought on a weekly chart. You are simply looking at stock in different time frames.

So, it depends what time frame you are trying to trade. Weekly would only be relevant if you are wanting to trade that time frame. In that case, you might then use the daily indicator to fine tune entry in the direction of the weekly signal.