Bullish RSI Divergence -A case study and future recommendation

tksthathachari Updated   
RSI Divergence refers to the deviation of RSI with respect to price. Even though the price may be going in a set direction (say making lower lows), the RSI could go in a completely different direction (higher lows). RSI is a clearcut indicator of buyer strength or buyer accumulation at a specific given time and price. An RSI Divergence generally is strongly related to change in trend.

RSI Divergence can be of 2 types: Bullish and Bearish. Here I shall discuss about Bullish RSI Divergence. In case of Bullish RSI Divergence, the price makes a lower low (in a downtrend) while the RSI makes higher lows (a sort of W formation). This shows that even though the price is dropping, the buyer strength and accumulation is increasing.

Please refer the image above for visual example.

How to trade?
In case of bullish divergence, one should go long with a SL below the low of the present price.

In the present case, one can go long in Amaraja with a SL of 660 and for a target of 800-850
Stock made a high of 700..The stock is up by 3% from suggested levels. Hope some of you acquired the stock for short term or long term gains..Cheers!
Trade active:
Stock made a high of 720..Pure 6% from recommended levels. An easy swing trade done. However the wait for the short term target is still far away! Fingers crossed
Stock is halting at 720 levels after a big upmove from suggested levels of 680. It is forming several Doji candles and inside candles. Can move upto the first big time resistance of 740...
Stock made a high of 740..Now stock may halt for some time before marching towards 800..REversals upto 710-720 levels are also possible..But reversals upto 660 levels seem close to negligible..
RR Ratio achieved till now = 1:3
Stock made a high of 775..1:5 done!!


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