Forum Archive Index - August 2002

["andrew cottingham" <arco@adinfinitum.co.nz>]

Hi Snoopy

RSI is regarded by some technicians as the second strongest indicator in
technical analysis.  (The first being MacD). I personally think it is
definitely one of the strongest and most useful of TA tools.

RSI gives three types of trading signals. The strongest is the RSI
divergence, then charting patterns, and then the level of RSI.

Bullish or bearish RSI divergences normally occur at major tops and bottoms.
They show when the trend is ready to reverse.

A bearish divergence occurs when prices hit new highs but the RSI indicator
traces a lower peak than the one before it.  (This is what we are seeing on
the GMF chart).

A bullish divergence occurs when prices fall to a new low but the RSI
indicator does not dip as low as its previous dip.

Andrew



----- Original Message -----
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Monday, August 19, 2002 10:58 AM
Subject: Re: [sharechat] GMF


> 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
>
>
> ---------------------------------
> Message sent by Snoopy
> e-mail  tennyson@caverock.net.nz
> on Pegasus Mail version 2.55
> ----------------------------------
> "You can tell me I'm wrong twice,
> but that still only makes me wrong once."
>
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