The Relative Strength Index

If you’ve been reading the blog for a while, you’ve probably noticed that I usually supplement my price analysis with a momentum indicator. I’m not the guy with 27 oscillators down below price, never have been. But the Relative Strength Index, or RSI, is an indicator that works for me. I say “works for me”, because everyone has different time frames and objectives. I think it’s important to recognize that.

The Market Technicians Association has asked me to give a presentation tonight in front of the New York City Chapter. When trying to figure out a topic, so many different things came to mind. We literally could discuss anything from Sentiment, to Seasonality, to Sector Rotation or Intermarket Analysis. But I’ve been to a lot of MTA events, and I can’t recall the last time someone focused on this particular indicator. So tonight, let’s talk momentum.

We’ll go over how RSI tends to travel in the upper end of its range in healthy environments while traveling towards the lower part of the range during unhealthy periods for an asset.

mta RSI bull bear

Bullish and Bearish Divergences really help us with entry points and risk management. I’ll try to provide some historic examples as well as some real-time charts. Here is an example of a Bullish Divergence, where price is making a lower low, while RSI puts in a higher low:

mta RSI bull div

And here is a Bearish Divergence where price is making higher highs with RSI putting in a lower high:

mta RSI bear div


We’ll discuss in more detail tonight. See you there