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We often use this popular indicator but, the trading
interpretation is not that obvious.
Example : The obvious property H>L does not always imply
RSIA(H,14)>RSIA(L,14).
[RSIA(H,14) is the RSI transformation applied on H
array]
The RSIA(H,14), RSIA(L,14) and
RSIA(C,14) classification for various periods of the history of a stock
would probably throw a light to the trading
profile.
Since RSI is quite unsmoothed [compared to StochD or MACD] we
shall use a 20-DEMA to filter out small changes
and leave the major trends.
In your indicator builder paste the
// H, L, C smoothed RSI
<FONT
size=2>k=20;dL=DEMA(RSIA(L,14),k);dH=DEMA(RSIA(H,14),k);dC=DEMA(RSIA(C,14),k);Plot(dL,"LowRSI",4,1);Plot(dH,"HighRSI",5,1);Plot(dC,"CloseRSI",1,8);Plot(0.9*dL*(dC>dL
AND dC>dH),"",1,2);Plot(0.9*dL*(dL>dH AND
dL>dC),"",4,2);Plot(0.9*dL*(dH>dL AND
dH>dC),"",5,2);Title=Name()+" , LowRSI = "+WriteVal(dL)+" , HighRSI =
"+WriteVal(dH)+" , CloseRSI = "+WriteVal(dC);
The black area occurs when the CloseRSI is higher than HighRSI
and LowRSI.
The red area gives the [strange at first sight] periods when
the LowRSI is above the others and
The green area is what I was expecting before this
investigation, the HighRSI to be greater than the others.
Some preliminary questions now :
a. What is the trading interpretation of dL>dH
?
b. If RSI>70 means the stock is o/b, what is the meaning of
dL>70>dC ?It seems as if "the Lows are o/b but the
Closes are not o/b yet"
c. For a path from 30 to 70 dL is above dC. It seems as if
"the Lows are moving faster than the Closes" and it may be translated as lack of
selling pressure [??]
d. The HighRSI made a peak and has already turned downwards
and the LowRSI is still moving higher.
Is it a signal that the rally comes to an end
[??]
Since the international T/A literature is poor [and it is not
the first time...],
we could search this [interesting] area in this pioneer list
[and it will not be the first time...]
RSI users/RSI fans are invited !!
Dimitris Tsokakis
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