SYNGENE has been in an uptrend since Feb’23. However, since beginning of May’23 the uptrend has been marked by bearish divergence on the RSI. Traditional RSI theory preaches that a bearish divergence, particularly above 70 RSI level, can potentially reverse the trend to the down side. The case of SYNGEN defies that theory, even considering that Technical Analysis is probabilistic. Consider how many bearish divergences (marked in blue) are there on the RSI, below the primary purple divergence line. SYNGENE has rallied over 16% since beginning of the divergence.
Late Andrew Cardwell has done some stunning original research on the RSI subject and fascinatingly used RSI concepts for Bullish, Bearish, and Trend-less markets. He postulated that:
1. In uptrends RSI stays above 40 level and usually moves in the range of 40 and 80, as price keeps making higher highs and higher lows.
2. In downtrends RSI stays below 60 level and usually moves in the range of 60 and 20, as price keeps making lower highs and lower lows.
3. In trend-less sideways markets RSI usually stays between 60 and 40 range as price keeps making irregular highs and lows, mostly travelling eastwards.
4. Bearish divergences are common in bull trends and bullish divergences are common in bear trends.
I am not talking about other divergences Cardwell proposed as the focus now is on the interesting three-month long bearish divergence.
Bearish divergence with price on the RSI is indicative of a regular correction in the ongoing uptrend that keeps making higher highs and higher lows despite the divergence prolonging into months.
However, if the divergence persists and pushes RSI below 40 level, into the bear territory, a probable change in the market structure to a downtrend can be expected. If RSI does not enter bear territory, below 40, even after much prolonged divergence to price, what happens to the divergence. At any time, after the divergence and before RSI moving below the 40 level, RSI crosses back up the primary divergence line the divergence gets negated. Somehow technicians do not talk much about the negation of divergence concept.
Coming back to SYNGENE, how long does the divergence persist? Will it negate? When will it negate? Only future price and RSI action can tell. Till that time enjoy the uptrend.
“A trend is a trend: all are friends.
If you buck one you must make amends.
If the old one reverses,
Shout hooray, never curses.
Ride the new one up, down; mind the bends!” - Brian Marber
Late Andrew Cardwell has done some stunning original research on the RSI subject and fascinatingly used RSI concepts for Bullish, Bearish, and Trend-less markets. He postulated that:
1. In uptrends RSI stays above 40 level and usually moves in the range of 40 and 80, as price keeps making higher highs and higher lows.
2. In downtrends RSI stays below 60 level and usually moves in the range of 60 and 20, as price keeps making lower highs and lower lows.
3. In trend-less sideways markets RSI usually stays between 60 and 40 range as price keeps making irregular highs and lows, mostly travelling eastwards.
4. Bearish divergences are common in bull trends and bullish divergences are common in bear trends.
I am not talking about other divergences Cardwell proposed as the focus now is on the interesting three-month long bearish divergence.
Bearish divergence with price on the RSI is indicative of a regular correction in the ongoing uptrend that keeps making higher highs and higher lows despite the divergence prolonging into months.
However, if the divergence persists and pushes RSI below 40 level, into the bear territory, a probable change in the market structure to a downtrend can be expected. If RSI does not enter bear territory, below 40, even after much prolonged divergence to price, what happens to the divergence. At any time, after the divergence and before RSI moving below the 40 level, RSI crosses back up the primary divergence line the divergence gets negated. Somehow technicians do not talk much about the negation of divergence concept.
Coming back to SYNGENE, how long does the divergence persist? Will it negate? When will it negate? Only future price and RSI action can tell. Till that time enjoy the uptrend.
“A trend is a trend: all are friends.
If you buck one you must make amends.
If the old one reverses,
Shout hooray, never curses.
Ride the new one up, down; mind the bends!” - Brian Marber
Raju KMS Datla