Tops and bottoms, Failure Swings, divergence
Traders watch for double tops or what Wilder referred to as "failure swings." If the RSI makes a double top formation, with the first peak above 70%, and the second peak below the first, you get a sell signal when the RSI falls below the dip. In contrast, the double bottom at or below 30% (with the first low below 30% and second place at the same level or above) gives you a buy signal when the RSI breaks above the previous peak.
These failure swings can lead to differences between RSI and price action. For example, divergence occurs when the market makes a new high or low, but fails to set the appearance of a new RSI high or low. A waiver may be an indication of an impending reversal. According Wilder, differences are the most important signal provided by RSI.
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