What is RSI telling me?

Part of my trading system is RSI indicator. The RSI flashes a signal that price is about to stall or change direction. Of course I have no way of know which but I can take action to profit from either situation. In the chart below notice the blue circles at the bottom. These circles point out the RSI in extreme overbought or oversold condition. These are excellent spots to lock in profit or at least prepare for possible trend change.

Since I only trade long on CEFL and go to a half position when I get a sell signal so going short isn’t an option. But if I have been in a half position during a long down move the RSI signaling oversold I know the downtrend is running out of steam. If I have been in a nice long position like today…where I am up really nice since the last buy signal I know when the RSI moves into overbought zone (70) I should look to lock in some profit. Not close the trade…the chart below is giving warning signs this run might be running out of steam. The adx/dmi is in extreme overbought…the TSI and MACD are wanting to rollover and RSI is near its extreme. Everything signal but price and the moving averages are flashing a warning. I wait….as long as moving averages stay properly aligned and price remains above the 20 ma I stay long a full 2000 shares.

cefl124

 

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