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CHART SCHOOL Lesson 101.7...STI(2,5) Technical Indicator

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simplegreen   Wednesday, 11/14/07 09:22:18 PM
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CHART SCHOOL Lesson 101.7...STI(2,5) Technical Indicator

The Relative Strength Index is the heart and soul of the
STI(2,5)...remember our early lesson describing RSI and the fact that RSI 14 is 14 sampling periods...in the STI we have 2 components in overlaid format...RSI2 and RSI5.Simply put on a daily chart we are looking at the 2 day and the 5 day RSI in one overlay and how they relate to each other.A downtrodden stock will find it difficult to rise above the 30 line in strength on the RSI5 but the RSI2 will usually whipsaw across the 30 mark but fall right back til its strong enough to hold above the 30 mark.Once the 2 is across then its up to its companion RSI5 to try the same trick..Once across 30 then falling back no lower than the 30 it is gaining strength and now must test the 50 mark with the same scenario as before...If this is successful then its headed for a test of the big leagues..the might 70 mark!A bullish cross of the pair of RSIs of the 70 is also marked by MACD bullish crossing as well as others..all eyes are then on the stock and volume kicks in...momentum kicks in and the stock runs up nicely.This is how it is supposed to play out in a perfect world.Thorough testing of each level will occur in most cases unless news drives it up all at once.Here is an annotated chart to study and end this session.Next 2 sessions will also be STI(2,5)...one will be a weekly chart...the other a 10 minute daychart.



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