Forum Archive Index - August 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi andrew,
 

> 
>It is perhaps important to remember 'Rising wedges' do have a
>failure rate of around 24% (according to Bulkowski), however you
>will notice on the lower pane that RSI is in bearish divergence with
>the rising price and this is also a negative factor. Forearmed is
>forewarned.
> 
> 

To translate what you just said for those 'non chartists' out there 
(including me) I consulted a reference on 'RSI'.   The 'relative 
strength indicator'is a number between 0 and 100, calculated using 
the upward price change averages and the downward price change 
averages, usually over a fourteen day period.  If the upward price 
changes are significantly greater than the downward price changes you 
get an RSI closer to 100.  If the downward price changes are 
significantly greater than the upward price changes, then the RSI 
goes towards 0.   It is when the index reaches extremes of above 
70% or below 30% when RSI comes into play.

A 'buy' signal is given when a low rating (under 30%) co-incides with 
a rising share price.  A 'sell' signal is when a high rating 70%+  
comes at a time when the share price starts to fall.

The way I read your chart the RSI as it is today, around 55%, is 
almost bang in the middle of the allowable range which means it is of 
little use as an indicator until it reaches the 30% or 70% level.  
Are you sure you aren't reading too much into your RSI statistic?

SNOOPY


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