The HHLLS (Higher High Lower Low Stochastic) study is a momentum-based technical indicator developed by Vitali Apirine. It consists of two stochastic lines, the calculation of which is inspired by StochasticFull and Williams%R. The main purpose of HHLLS is to recognize trend behavior: emergence, corrections, and reversals. This can be done by spotting well-known signals: divergences, crossovers, and overbought/oversold conditions.
The HHLLS indicator is calculated as follows. First, the study calculates two values, HH and LL:
- HH. For bars with the high price greater than the previous high (otherwise 0):
where Hc is the current bar’s high price, Hl and Hh are the lowest and the highest high prices over a certain period.
HH = (Hc - Hl)/(Hh-Hl),
- LL. For bars with the low price less than the previous low (otherwise 0):
where Lc is the current low price, Ll and Lh are the lowest and the highest low prices over a certain period.
LL = (Lh - Lc)/(Lh-Ll),
Both variables are then smoothed with a moving average, resulting in two main plots HHS and LLS. The values of these plots range from zero to 100, rarely reaching either boundary. Thus, by default, overbought and oversold levels are set at 60 and 10, respectively.
The divergence between the price and HHLLS plots might prove useful in recognition of trend reversals or corrections. A bearish divergence is indicated when the price is trending up but HHS fails to confirm this move. Conversely, price making a new low when LLS goes up can be considered a bullish divergence. Divergence of either type may need additional confirmation: a signal may prove stronger when one of the lines forms the divergence and the other crosses above the level of 50.
Another technique of using HHLLS is analyzing the behavior of the main plots in relation to each other. When HHS is rising while the LLS is making new lows, the price may be entering an uptrend. The opposite situation may lead to emergence of a downtrend. The crossovers of the two lines may also indicate important trading signals.
||Defines the period on which the highest high and lowest low prices are found and also the length for calculation of the moving average.|
||Defines the overbought level.|
Defines the signal level used in divergence confirmation.
||Defines the oversold level.|
||The type of moving average to be used in calculations: simple, exponential, weighted, Wilder's, or Hull.|
||The Higher High Stochastic plot.|
||The Lower Low Stochastic plot.|
||The overbought level.|
||The signal level.|
||The oversold level.|
1. "Higher Highs & Lower Lows" by Vitali Apirine. Technical Analysis of Stocks & Commodities, February 2016.
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.