Great Forex RSI divergence and trendline violation signals

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Great RSI divergence and trendline violation signals

Introduction

As you know by now a divergence and a support/resistance line violation on a momentum indicator is the strongest technical analysis in trading. Not only in Forex, and it works in all timeframes.

There are some amazing longer term signals happening. With these signals you can literally catch a trend very early in its life. It is ideal for any type of trading approach (scalping and swing trading) but best when using the Grid Trend Multiplier which multiplies the pips you get from a trend.

Example 1 and description of technique

The USDCAD monthly chart is showing a textbook setup for this system. The RSI (set for 4) is showing a strong Forex RSI divergence (price trending one way and the RSI in another way). It has 2 well formed waves which are providing a support and resistance trendline. Once the RSI goes below the trendline that will be a sell signal. A engulfing candle supports the trade. GTM Traders can enter this trade and stay in it for months as the direction seems sound on a technical analysis basis.

This technique often identifies engulfing and reversal pinbar candle formations.

 

cadmonth2

 

Other currencies showing the same type of monthly signals are NZDUSD, AUDUSD.

Example 2

+450 pips up

Little too late: The GBPAUD weekly chart is showed a textbook setup for this system. The RSI (set for 4) is showed a strong divergence. It has 2 well formed which are providing a support and resistance trendline. Once the RSI goes below the trendline that will be a sell signal.  Notice how early the signals happen. This is a way of turning the RSI into a leading indicator as it is so sensitive to trend changes.

One of the weaknesses of the RSI is that it is not good in a trend. The support/resistance trendline approach turns the RSI into a with the trend indicator.

 

weekly1

 

Example 3

USDCHF Weekly – No divergence this time but supported by a head and shoulders formation. Happened on Friday.

 

weekly 2

 

Example 4

+200 pips already

Another little too late: The GBPAUD weekly chart is showed a textbook setup for this system. The RSI (set for 4) is showed a strong divergence. It has 2 well formed which are providing a support and resistance trendline. Once the RSI goes above the trendline it is a sell signal.  Notice how early the signals happen

 

weekly 3

 

Example 5

Some Daily chart setups

NZDUSD

daily2

 

Now that you know how it is done why not review the 15 min, 1 hour, 4 hour and daily charts for RSI Divergence/trendline signals. At the same time find examples of this approach working in the past and work out how much you lost not trading this simple technique

 

 

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1 Comment

  • Chris Smith

    Reply Reply October 14, 2015

    Hi Alex.
    Very useful and simple.
    Example 4 is not GBP/AUD. Should it be NZD/USD ?

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