Check the contact surfaces of the electrical connector.

Not seen this happen before but what it was the Thermostat jerking around.

This was on a gasser and it did not have your symptoms. I had the temp probe get coated with white residue and which apparel did not conduct heat to the sensor well. When cleaned off everything was normal.

And of course it could be a failing sensor.

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84 300D, 82 Volvo 244Gl Diesel