How to combine PowerRatings and RSI
Here at TradingMarkets, we are always looking for
new ways to use our tools to find an edge.Â
PowerRatings
is a great indicator to use in combination with other indicators
and strategies, and we consistently find powerful examples in the market to take
advantage of. In previous articles, we have published strategies on how to
use
PowerRatings
with other indicators.Â
One such indicator which can be used in conjunction with
PowerRatings
is the RSI reading.Â
RSI stands for Relative Strength Index and is a
technical analysis oscillator that is very useful in gauging a stock’s price
strength. The formula for RSI calculates price change over a period of
days and gives the stock a rating from 0 to 100. If a stock has an RSI
reading over 70, it is considered overbought, and therefore in line for a
sell-off. If a stock has an RSI reading under 30, it is considered
oversold, and therefore ready for a price move up. Based on historical
research, we at TradingMarkets have discovered a unique approach to utilizing
the RSI reading by combining a stock’s RSI to its
PowerRating.Â
By using both indicators, we strengthen the probability that a move will occur.
Sify Limited
(
SIFY |
Quote |
Chart |
News |
PowerRating) had a
PowerRating
of 2 on 2/08, which would give traders a heads up that the stock
price has an excellent chance of falling over the next five days. On the
same day that SIFY received a
PowerRating
of 2, traders would have discovered that SIFY’s 2-period RSI reading was
96.48. So here we have a stock
PowerRated
2 that is also triggering an RSI reading of 96.48. Just using these two
indicators, traders are handed an edge, given SIFY’s performance over the next
five days.Â
After triggering a
PowerRating
of 2 and an RSI reading of 96.48, SIFY’s stock price fell 13.63%, from
$13.87 to $11.98.Â
Over and over at
TradingMarkets, we follow these kinds of moves and look for new ways to utilize
PowerRatings
with other strong indicators.Â
PowerRatings
is a wonderful stand-alone tool, but traders have found that
accuracy increases with each additional indicator used. We have discussed
using
PowerRatings
with moving averages and classical chart patterns, and we will
continue to bring you new ideas and combinations. We invite all traders to
use
PowerRatings
with their own techniques and patterns and to let us know how you are
doing.
By using RSI and
PowerRatings
together, traders gain an edge, allowing more accurate
predictions and more profitable trades. We hope that you are enjoying
learning new
PowerRatings
techniques, and stay tuned for tomorrow’s
PowerRatings
lesson.
John Patrick Lee
Associate Editor
Please email me with any suggestions or
strategies that you are using to improve your trading with
PowerRatings.
Click here
to take a free trial to
PowerRatings.
You can also
attend a free
class on how to use
PowerRatings
presented by Steve Primo, our Director of Education.