RSI Divergence(s) :: A Case Study 📈📉Hey Pivster's ★
Found out one interesting query in a public forum and thought to provide the explanation through a chart so that it can be documented for reference in future.
Chart is actually self-explanatory as marked and constructed accordingly 🫶
◉ Query:
"During uptrends prices make lower highs whereas RSI makes lower lows..this is called positive reversal".
This is a statement made by Bharat Jhunjhunwala in one of his lectures....i don't get the lower highs in prices...can anyone explain?
☞ My answer would be -
➣ He is basically taking about a RSI positive divergence scenario where the “Price” has higher probability for making a reversal.
➣ This scenario is ideal as 'RSI' is mostly taking closing price into consideration. SO, when the price starts to close above the previous red candles it shifts the RSI curve towards an uptrend and a reversal can be confirmed once the 'Price' breaks the previous Lower High (LH) which will eventually be in correspondence to the 'RSI' making a Higher Low (HL) after a visible "Positive Divergence" to the 'Price' chart.
➣ Here, the structure for the 'Price' is now expected to reverse and follow the structure of an "Uptrend" now while the "RSI" continues making Higher Lows (HL) as the closing price is higher to that of the previous candle in an 'Uptrend'.
Explained this whole scenario in the chart of NSE:MARUTI which showed a fresh and live demonstration of this discussed scenario in the last trading session that was on 1st September, 2023 (Friday) 📍
Well just to add a better confluence alongside PIVOT POINTS, here is the same chart with weekly pivots applied ↘︎
- This shows the entry of Weekly Initiative Players ( WH4 ) once the reversal structure gets confirmed ♠️
I hope your query has been answered to a satisfactory level and understanding from the basic to core 🥂
Let me know your view/suggestions in the comment section below 😊
Regards,
Mukkull
