Relative Strength Indicator (RSI) Will Tell You When To Get In?

If the market does rally into year end, the question becomes: when do we get in?

The current sell-off has likely shaken the confidence of many weak hands. But a look at recent history shows us we may soon have a good buying opportunity. During long-term uptrends the Relative Strength Indicator (RSI) provides a useful tool in knowing when to “buy a dip.”

Here’s a chart of the S&P500 futures going back to 2010.

See image larger

As you can see, in the past three years, the RSI has given three buy signals on the S&P500. The strategy is simple. Buy when the RSI hits “oversold” territory (green on lower chart), then sell when it moves to “overbought” (red).

These three trades alone netted 15%, 14% and 9% winners. Trading just one futures contract on the S&P500 (which requires about $5,000 in margin) would have turned a total profit of a little more than $20,800.

I’m talking about this now because we may soon have another RSI buying opportunity. If you look at the RSI subgraph you’ll see the current sell-off has brought the indicator’s value down below 40. If it moves below 30, I’ll have good reason to believe the sell-off is over and prices should turn higher just as they have the past three times the RSI hit this level.

We should know more next week – stay tuned.

If you haven’t done so already read the Survive & Prosper issue on “November 6 Will Make NO Difference: Stock Bubble Crash is Cominged”



How CEOs are Earning 335x MORE Than Their Own Employees

What if I told you up to 95% of companies currently trading on the stock market today are essentially stealing money right out of your pocket!? This includes some of the biggest names in the corporate world… companies that trade millions of shares a day, who you might be invested in right now!

Discover just how far the deceit on Wall Street goes and how you can still uncover many lucrative opportunities in the stock market today, in our new infographic: How CEOs are Earning 335x MORE Than Their Own Employees

Categories: Economy

About Author

Adam O’Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.