RSI and MACD-Line Part II

Our analysis continues.

4. Price heads a little lower in the beginning of March.

a) Then Stochastic dips below and above the 20% level, a Buy signal.
b) The shape of the bottom suggests that Euro bears/ Pound bulls held out for a while before giving up control.

There is one big blue candle, corresponding with the beginning of March, when bulls finally wrest control.

5. The blue candle is followed by another 5 session battle between the pair's bears and bulls.

a) As the seesaw action progresses MACD and RSI start rising in tandem.
b) The MACD trend that is being established does not stop until mid-April.
c) After 14 sessions at overbought levels, Stochastic finally dips below 80 signaling a Sell.

The contraction should be weak as Euro bulls did not give up control easily. One should look for warning signs of the contraction ending early.

a) The warning comes in the form of the RSI indicator bouncing of its 50 level,
b) price bouncing off its 21 day moving average, and
c) MACD stops heading down (this signal is a little late).

One should re-buy even though Stochastic doesn’t get to 20.

6. There is a truer signal at (6) as the three indicators combine to show a sell setup.

a) RSI hits its overbought level of 70,
b) MACD-Line peaks higher than in (5),
c) and Stochastic dips below 80.

The Stochastic top is narrower than the previous one suggesting a more pronounced contraction than before.

7. The downswing stalls as Stochastic hits 20.

a) The Stochastic bottom is not deep, but it is broad.
b) RSI hovers around 50.
c) MACD levels off after establishing the downtrend.

These signs point to another rally, albeit a weak one. One should Buy cautiously.

8. The rally is very short lived as Stochastic just touches 80 and reverses.

a) The bears seem to be in control of the price, and there is an indication that the upcoming contraction should be strong.
b) This speculation would also mean that the downtrend suggested by MACD from the start of April will continue.
c) RSI reverses before hitting overbought.

A technical trader following these three indicators woul obtain a Sell position here.

9. The present – Stochastic shows the Euro oversold deeply, so bears are strong and in control still.

a) RSI just turned back up (last session is a decent sized buy candle).
b) MACD is perhaps leveling off and can be a sign that the April downtrend is ending.

This could be a turning point but one should think that the imminent rally will not be strong. A Stochastic cross above 20 will be a signal to Buy. 

ShareThis

The materials presented on this website are solely for informational purposes and are not intended as investment or trading advice. Please refer to our risk disclosure page for more information.