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Buzz of the Street: Sentiment Fizzles After Good Earnings

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Some of this week's most insightful and timely vibes.

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Wednesday, October 21 2009
RSI Failure Swing
By David Waggoner



A fairly reliable method of identifying significant turns using the RSI is the failure swing. It happens when the RSI closes above 70 (1), retraces, then pokes above 70 again but doesn't take out the old high (2). The pattern is complete when the lower peak's trough breaks below the trough following the higher peak (3). If this occurs as a divergence from price, it is an even stronger and more reliable signal.

On this daily chart of the NASDAQ 100 (e-minis), the signal triggered on October 2nd. Since then price rebounded off the 50 level to new high, but the RSI divergence has become more pronounced and remains below the 70 line. Technically, the RSI Failure swing is still valid.


Click to enlarge


Aint Got Rythym
By Smita Sadana




On Balance Volume is one simple way of measuring divergence or confirmation.

Prices have been moving higher lately but there are initial signs emerging that OBV is divergent. I especially keep an eye on the Russell since a) it's a broad index and b) it has more speculative stocks and some speculation is a must for continued market ascent.

Here is a look at beginning of divergences in the OBV of IWM (ETF for Russell 2000).

Please remember that these might not be imminent and instantly actionable divergences but certainly a development to keep on your radar.


Click here to enlarge
No positions in stocks mentioned.

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