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RSI divergence ideas: how they turned out

February 18, 2013

18 February

In April and May 2012, I showed some charts with weekly RSI divergences. This set up occurs rarely and on most occasions, marks a pause in the trend and a significant retracement. I can scan for this set up across hundreds of stocks, commodities, currencies and indices. Obviously, there are more occurrences for stocks when the market indices have this set up.

1    Natural Gas: Shown on 10 April

Natgasweekly_170213

  • Natural Gas was at $2.29 on 10 April. It fell until 18 April (making a daily RSI divergence also)
  • It rallied to $4.07 on 19 October
  • The October peak did not have a weekly RSI divergence but there was a daily RSI divergence
  • You’ll see in my methods section how I use daily RSI divergences for taking positions off but not for opening them

2    Euro v US Dollar: Shown on 28 May

Eurusd_weekly_170213

  • The Euro v US Dollar chart was shown having a daily RSI divergence but without a weekly RSI divergence
  • The posting showed what had occurred at a previous similar situation
  • Exactly the same thing followed: a rally before a new low was formed, this time in July 2011
  • A bullish weekly divergence was formed (albeit on the 9 week RSI, moving the goal posts a little) and this marked a longer term low

3    Emerging Markets ETF (EEM): Also shown on 28 May

Eem_rtt_170213

  • This was shown with a daily divergence but no weekly divergence but this still marked the low
  • Although this particular daily RSI divergence worked as an entry point, there was a retest in early June. It was almost two months before a sustained move started

4    T Bond yields: Possibility shown on 30 May and occurrence on 11 June

Tyx_170213

  • The previous bullish weekly RSI divergence was in 2003
  • The final low was made on 25 July
  • From the weekly divergence to now, yield has rallied from 2.54% to 3.18%

Summary

  • Weekly RSI divergences have a good record of marking turning points
  • Sometimes, the turn can take a few months to get moving
  • Daily RSI divergences are less reliable at marking long term turns but still should be heeded in shorter term trading

 

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