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Figure 16-4
Cardwell's RSI Chart |
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a resistance level several days or weeks ago is now becoming support. This is indicative of an up-trending market. |
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Just as with a price chart, you can draw trend lines and see patterns develop on an RSI chart. On a price chart if you draw a trend line based on three higher bottoms, you can expect support to develop any time the price declines to the trend line a fourth time. Should the price continue to decline through this trend line, you will often get a retest of that trend line as the bulls attempt to pierce the line, this time from underneath. This retest from under the former bullish trend line, which was acting as support and is now acting as resistance, is a typical distinction of a bear market. This same principle applies to the RSI; a violation of a proven trend line on the RSI chart will often occur prior to a violation of a trend line on a price chart. |
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Double tops and bottoms, symmetrical triangles, bullish falling wedges, bearish rising wedges, and descending and ascending triangles can all be found on an RSI chart, and all are valid. Likewise you can expect to |
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