Williams %R

Williams %R is an oscillating indicator that is similar to both the rate-of-change indicator and the relative-strength indicator. It consists of a single line that moves back and forth in a range between 0 and 100.

This indicator compares the closing price of the most recent trading period with the trading range of the security during the past. If the most recent closing price is near the top of the security’s trading range, the Williams %R line will be near the top of its range. If the most recent closing price is near the bottom of the security’s trading range, the Williams %R line will be near the bottom of its range.

Anytime the Williams %R line is above 80 or below 20, it is considered to be overextended. When you see these situations, you know there is a high likelihood of the price of the underlying security turning around and moving in the opposite direction. The Williams %R creates simple buy and sell signals as it moves out of these overextended areas and back into the middle of the time range—as you see on the Home Depot (HD).

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