I would like to ask a general question to the community here
regarding the use of RSI in TA. Here at BPT I find
that RSI is mainly mentioned when the it is in the state
of overbought or oversold. However I often notice that if one
draws a trendline on the RSI when those appers in clear patterns
(which is not 100%), a break of that trendline often precludes a
shift in the price trend. It acts like a kind of warning
flag that hey, watch out, the Stochastics are soon about to
rollover 20 or 80 as well and then the price will move too.
I include a sample from S&P 5 min chart from yesterday where
you can see how the trendline of the RSI on two
instances is broken about an hour before the STO(60) rolled
over.
Is this a technique that you are using or you do not
think that it works well enough?
I think using Trendlines in conjunction with other indicators
are good to use. Infact it might be worth checking historical
newsletters because Matt does something similar with GDX on a 60min
chart from memory. I can't recall which exact chart
The difficulty I have is knowing which points to use on the
trendline. I know in hindsight it looks simple but in the heat of
the battle, which points do you use to join on the trendline? I
know its the key peaks or troughs but what in reality you only know
the key peaks and troughs after the event
So I guess yes trendlines are great.....in conjunction with
other indicators is my opinion
I agree about the enormous value and clarity of trendlines in
retrospect. But, in real time, it is often very difficult to
decide on what counts as a point in a trendline. Much better,
in my opinion, is looking for higher highs and lows or the inverse.
That technique has its messes too, but at least there is
something objective about higher highs etc.
Technical Analysis - RSI
Posted by etcbari on 19th of Aug 2010 at 05:09 am
Hi,
I would like to ask a general question to the community here regarding the use of RSI in TA. Here at BPT I find that RSI is mainly mentioned when the it is in the state of overbought or oversold. However I often notice that if one draws a trendline on the RSI when those appers in clear patterns (which is not 100%), a break of that trendline often precludes a shift in the price trend. It acts like a kind of warning flag that hey, watch out, the Stochastics are soon about to rollover 20 or 80 as well and then the price will move too.
I include a sample from S&P 5 min chart from yesterday where you can see how the trendline of the RSI on two instances is broken about an hour before the STO(60) rolled over.
Is this a technique that you are using or you do not think that it works well enough?
Bjorn
I think using Trendlines in
Posted by vimal on 19th of Aug 2010 at 08:45 am
I think using Trendlines in conjunction with other indicators are good to use. Infact it might be worth checking historical newsletters because Matt does something similar with GDX on a 60min chart from memory. I can't recall which exact chart
The difficulty I have is knowing which points to use on the trendline. I know in hindsight it looks simple but in the heat of the battle, which points do you use to join on the trendline? I know its the key peaks or troughs but what in reality you only know the key peaks and troughs after the event
So I guess yes trendlines are great.....in conjunction with other indicators is my opinion
I agree about the enormous
Posted by algyros on 19th of Aug 2010 at 09:28 am
I agree about the enormous value and clarity of trendlines in retrospect. But, in real time, it is often very difficult to decide on what counts as a point in a trendline. Much better, in my opinion, is looking for higher highs and lows or the inverse. That technique has its messes too, but at least there is something objective about higher highs etc.
etcbari - I think your
Posted by steve on 19th of Aug 2010 at 08:08 am
etcbari - I think your observations are certainly relevant and this is something that I personally employ. Simply put, use what works.