The brick wall of the RSI

  • Posted: 05 December 2011 01:26 PM

    Well fellow AFB members it seems barring any macro economic crisis we are on our way in the traditional holiday seasonal rise in share price that will probably continue to Jan earnings call. 
    Looking at history regardless of any other metric or valuation method, once the RSI hits +70 to as high as 81 it SEEMS to trigger a steep selloff/drop of $35 or more. 
    As of right now the RSI is 57 and has gone up quite significantly in the past week.  Given this rate of rise of the RSI we might not see $420 and certainly not $430 before the RSI hits 80 lets say. 

    I could well have this wrong but according to history this is what has happend.  Looking for some evidence or education (on the RSI) as to why this won’t happen.  I do know a long term investor will not be too bothered by this however for the purposes of this discussion can we keep it in the context of what we think the share price will do up to and maybe a few days after earnings please.

         
  • Posted: 05 December 2011 01:45 PM #1

    Unique - 05 December 2011 05:35 PM

    I think you are talking about the RSI on Daily.

    RSI on the July high of 404.5 was 90 RSI+ Daily

    The RSI change and the momentum of it is very different in each individual case.

    RSI can be sky rocket high 80+ for a long time..and stay there a few weeks before dropping if you look a year back.

    So the most accurate way to tell if it still has room to run would be using support and resistance levels combined with RSI or MACD.

    R- 400, 405, 410, 415 426..so on..
    S- 390 385, 378, 375, 370..so on..

    Unique
    I was using the RSI(14) (57.44 as I write this) is that the same you refere to as the RSI+ Daily?
    Good point that it can stay at +80 for a few days before a drop therefore not an immediate trigger.
    Where do you get the support and resistance levels from?
    Thanks
    Frank

         
  • Posted: 05 December 2011 02:09 PM #2

    Unique - 05 December 2011 05:50 PM
    fas550 - 05 December 2011 05:45 PM
    Unique - 05 December 2011 05:35 PM

    I think you are talking about the RSI on Daily.

    RSI on the July high of 404.5 was 90 RSI+ Daily

    The RSI change and the momentum of it is very different in each individual case.

    RSI can be sky rocket high 80+ for a long time..and stay there a few weeks before dropping if you look a year back.

    So the most accurate way to tell if it still has room to run would be using support and resistance levels combined with RSI or MACD.

    R- 400, 405, 410, 415 426..so on..
    S- 390 385, 378, 375, 370..so on..

    Unique
    I was using the RSI(14) (57.44 as I write this) is that the same you refere to as the RSI+ Daily?
    Good point that it can stay at +80 for a few days before a drop therefore not an immediate trigger.
    Where do you get the support and resistance levels from?
    Thanks
    Frank

    Yup, my RSI is (14) also, so we’re on the same page.

    I get resistance and support levels from drawing them. What I do is, draw horizontal lines across points which AAPL turned around or stayed there for a long time. For example, hourly chart AAPL, 390 was resistance now it is support because we are above it. Hope this helps.

    I use http://www.freestockcharts.com (it is free, but make sure you use an adblocker to block ads on the sides)


    (right click and view image to enlarge)

    A chart like this I drew a few weeks ago, helped me to predict the price action. If it breaks above resistance, then next resistance is target. If it breaks below support, then next support is target. That’s the basic idea, but needs to be combined with MACD for a more complex analysis.

    This is how I arrived on my 368 target, and 200SMA daily AAPL target which was hit recently.

    Great that’s helpful.  Always looking for new good tools.  I tend to buy/sell LEAPs on a quarterly basis.  I buy based on fundamentals and valuations (using FINVIZ and a few others) and sell on technicals.  Not everyone’s cup of tea but works for me.
    Frank

         
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    Posted: 05 December 2011 02:53 PM #3

    [This post was removed because the moderators arbitrarily censor.]

    [ Edited: 08 January 2012 04:08 AM by the_dragonfly ]

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    In any society, when the rules are not enforced on some segment of the population, that segment will become increasingly abusive to the innocent. Examples: Cops & Old Timers on this forum.

         
  • Posted: 05 December 2011 09:26 PM #4

    Unique - 05 December 2011 07:16 PM
    the_dragonfly - 05 December 2011 06:53 PM
    Unique - 05 December 2011 05:50 PM

    A chart like this I drew a few weeks ago, helped me to predict the price action. If it breaks above resistance, then next resistance is target. If it breaks below support, then next support is target. That’s the basic idea, but needs to be combined with MACD for a more complex analysis.

    This is how I arrived on my 368 target, and 200SMA daily AAPL target which was hit recently.

    So, today you’d be expecting it to head to $399 or so, and then watch to see if it breaks thru, and if it does, then expect it to head to $408 or so?

    Haven’t touched AAPL for a few days, because it’s waiting for a TRUE breakout or breakdown here on 392-395. This is where it converges with the downtrend and horizontal resistance. I am only playing SPY for now.

    (Draw a downtrend line from 426 highs to now. Horizontal res/support at 395,392)

    To me a true breakout would be a close above 400.00 with bullish MACD.

    Thanks!

         
  • Posted: 06 December 2011 01:22 AM #5

    Unique - 06 December 2011 04:36 AM

    We closed above 392, this is a good formation for bulls. But bulls still need the confirmation on this technical breakout. And they must watch the overall market too. Consolidation instead of a sharp pullback is always good for bulls here. AAPL is still in wait and see mode for traders.

    SPX, on the other hand is still trading in a trending channel/rising wedge that can be compared with the October run up. Tomorrow and this week in general is important technical wise. For today, I liked the SPX action, it is still favoring bulls to a slight advantage. (higher highs, higher lows) . Even though hourly MACD is a bit bearish, there is no price confirmation to accompany this assessment yet. This is pretty much the same start up formation as the October run up for now, remember in October SPX had bearish MACD, but we still rocketed from 1180 to 1292 (almost 10% rise). Exciting times we are in.

    Thanks!