McClellan Oscillator Analysis & McClellan Oscillator Trading Signals

Developed by McClellan.

The McClellan Oscillator is an indicator that is based on smoothing the difference between the number of bullish candlesticks & bearish candles. This indicator looks similar to the traditional MACD.

McClellan Oscillator

Trading Analysis & Generating Trading Signals

This Oscillator is a momentum indicator that can be traded in the same way as the MACD indicator. There are 3 techniques that McClellan Oscillator can be used to generate trade signals.

Zero Center Line Crossover Signals:

Bullish Signals- When the oscillator crosses above zero center-line a buy trade signal is given.

Bearish Signals- When the oscillator crosses below zero center-line a sell stock trade signal is given.

Technical Analysis in Stock Trading

Divergence Stocks Trade Signals:

Looking for divergences between the McClellan Oscillator and price can prove to be very effective in identifying potential reversal and/or trend continuation points in price movement.

There are several types of divergences:

Classic Divergence (Regular Stock Trading Divergence)

• Bullish Divergence: Lower lows in price action & higher lows in the McClellan Oscillator.

• Bearish Divergence: Higher highs in price & lower highs in the McClellan Oscillator.

Hidden Trading Divergence Setup

• Bullish Divergence: Higher lows in price action & lower lows in McClellan Oscillator.

• Bearish Divergence: Lower highs in price action and higher highs in McClellan Oscillator.

Overbought/Oversold Levels on Technical Indicator

The McClellan Oscillator is also used to identify potential overbought and oversold levels in price action movements. The overbought and oversold conditions are generated when the oscillator moves to extreme levels on one side and starts to turn, however, in a strong trending market the oscillator will stay in the overbought and oversold levels for a long time. It is not recommended to trade overbought and oversold levels to generate stocks signals. The best signal to use is the Center-line cross over signals to generate trade signals.