Well it has officially happened! The RSI has put in its second RSI bearish divergence on the chart. For some, this may mean nothing. For me, this means I take down some more risk! It’s all good to lock in gains. So today, I will be taking down another 1/3 of my position in SPY. Let’s have a look at the chart!
So now what do we do? We are looking to put some capital to work. We should always be patient with capital. If the RSI fails at 70, we would be looking for it to set a higher low at around 55. That would continue the uptrend and we would be looking for the RSI to break the last high at 75. If we are going to have a pullback, we just want to see the RSI stay above 40. That is where we would get aggressive and add back our gains to the position. Looks good out there! Keep your head on a swivel!
but it's not diverging from the previous swing high so it can be taken that momentum is returning, also need to consider that the overall trend is up, so if it was bearish divergence appearing in an overall down trend it would be much more meaningful.
derzzycharts
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@Ravi2409 - yes I agree! In uptrends I use this tool to help with swing trades! Lock in some profits to put them in at lower prices!