Sunday, May 16, 2010 7:27:36 PM
...look for the "trend in the RSI".
If I see a "Divergence", between the trend and the price of the stock, then I am expecting a reversal in the price trend of the stock.
In the chart of CCTC below, you will notice that the RSI has been trending up from May 4thwhen it bottomed with an RSI of 12%. It peaked on May 7th at just under 70%, and then began dropping and closed on Friday at 18.65%. When you draw a line, connecting the lows of the RSI ( 12% and 18.65% ), the trend is UP.
Looking below at the price of the stock, the price bottomed at
0.1060c on May 4th, and bottomed at 0.088c on Friday. When you draw a line, connecting these lows, the trend is down.
You see now, that the RSI and the price of the stock are moving in opposite directions. This is a "Divergence", and implies that the price of the stock is going to reverse, meaning GO-UP!!
Support for the stock was at 0.1060c on May 4th. CCTC broke support on Friday. The stock will now reverse, and move up to test the support, which now is defined as resistance. Usually, you will find that the stock overshoots when it does test, hence, I expect that the stock will move up to at least the 0.12c level, merely on technicals, and retracement theory, which means a 38%, 50%, and possible 62% retracement of the fall, which is 0.058c, from 0.1460c on May 10th to Fridays low of 0.088c.
http://stockcharts.com/h-sc/ui?s=CCTC&p=D&yr=0&mn=1&dy=0&id=p61233851934
I hope this helps.
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