Key Point to Identify the direction of RSI Indicators

In the previous blog we discussed about the RSI Intraday Strategy | Best Indicator for Intraday and proceeding further today we will discuss about some key indicators that will provide you information on the RSI indicator if they are taking support or resistance or if they will breakout.

These indicators can help you to increase the chances of booking big profits. Starting with the Gap-Up and Gap-Down theory, we will further discuss the specifications that define the  “Breakout & Breakdown” with “ Reversal”.


GAP-UP & GAP-DOWN THEORY

Gap-Up

  • A Gap Up forms when the opening price for the day is higher than the previous day’s closing price.
  • For example, if the previous day’s high was 100, and the stock opened at 105, there would have been a 5-point gap up. This is considered a bullish signal.
  • So, if there is a Gap-Up in the price, wait for a Pull-Back and BUY at any EMA or any strong support which will cause the stock to bounce back up and your Risk-reward ratio will be higher.
  • If there is a Gap-Up and the price keeps going higher and doesn’t take a Pull-Back, ignore that stock and DO NOT TRADE ON THAT STOCK FOR THAT DAY.

Gap-Down

  • A Gap-Down form when the opening price for the day is lower than the previous day’s closing price.
  • For example, if the previous day’s high was 100, and the stock opened at 95, there is a 5-point Gap-Down. This is considered a bearish signal.
  • So, if there is a Gap-Down in the price, wait for a Pull-Back and SHORT at any EMA or any strong resistance which will cause the stock to rally back down and your Risk-reward ratio will be higher.
  • If there is a Gap-Down and the price keeps going down and doesn’t take a Pull-Back, ignore that stock and DO NOT TRADE ON THAT STOCK FOR THAT DAY.

BREAKOUT, BREAKDOWN & REVERSAL

Breakout and Breakdown

Reversal

RSI giving a breakout RSI took support or resistance
ADX Rising ADX Rising
No crossover on MACD Reverse crossover on MACD
EMA levels breakout EMA levels act as Supp or Resist.
Trend lines breaking Trend lines act as Supp or Resist.

These were some of the key indicators that will provide you information on the RSI indicator. Keeping these indicators in mind, no one can face difficulty on recognising the Breakout or Breakdown point or the Reversal point by the RSI Indicators.

Hope you enjoyed learning the Key Indicators which can help in recognizing the Support or Resistance of RSI Indicators.

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If you are new to trading and want to learn about stock market from scratch please check our video on “BASICS OF STOCK MARKET” here.

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