[ RSI Divergence ]
Glen, to my knowledge, the RSI divergence can be applicable to various price levels (or else we'd never find a bullish divergence again for the Dow if we had to wait for it to hit a new all time low). Therefore, I believe it can also be applied for local highs/lows.
But to further elaborate on the Divergence, we need to understand that it's only an early warning sign that a market could potentially change its trend. Because these signals are always in the opposite direction of the trend, they can often be wrong. During a prolonged price move, you could probably spot two or three divergences before you'd get a trend reversal.
Like any indicator, its effectiveness when used alone is limited, but becomes exponentially more accurate when combined with other verifying signals. Take the Bull Trap and RSI Divergence examples I previously posted. In addition, when possible, take into consideration trend-line penetrations, or moving average crossovers/penetration, something, anything; the more the better.
BTW, your observations on CKR appear to be correct, but aside from the divergence, what other signals were you getting to confirm that perhaps the trend would indeed reverse? In the examples I provided, with the failed signal (i.e. Bull/Bear Trap) being "among the most reliable of all chart signals"(Schwager on Futures: Technical Analysis, page 188), the observed RSI Divergence was well confirmed.
Keep up the good work. I'll try and post other divergences that I may run into.
Regards,
Rainier |
