Which of the following is true about the stochastics indicator?

The stochastics indicator is indeed recognized as a leading indicator of market sentiment. It works by comparing a security's closing price to its price range over a specific period, which allows traders to gauge potential trend reversals. When the stochastic oscillator shows values above a certain threshold (typically 80), it suggests the market may be overbought, indicating that a downturn could be on the horizon. Conversely, values below another threshold (typically 20) suggest that the market may be oversold, indicating a possible upward price movement. Thus, it is a tool used to gauge market momentum and sentiment, making the assertion of it being a leading indicator accurate.

In contrast, while market volatility can influence stochastics, the indicator itself is not designed to measure volatility directly. Its primary aim is to indicate momentum rather than delineate support and resistance levels, which are typically determined by other charting techniques or patterns. Additionally, although price movement is a critical component of the stochastics calculation, it also relies on the range of prices over time, making it not solely dependent on price movement alone. This multifaceted approach is what makes the stochastic indicator a vital tool for predicting potential price movements based on market sentiment.