One of the simple approaches that I use frequently is to use RSI (Relative Strength Index) to find long or short entries that present a high probability of success.
I came across the Daily chart of $CAT today and thought this would be a good candidate to review:
If you take a look at the price movement after the RSI touches at 30 (noted in the Green boxes), you can see that nice bounces occurred. As RSI once again tests the 30 level, will history rhyme?
There are two key differences this time that I’d like to point out:
- price is below the 200 day moving average and has been Resistance today.
- price has fallen through the Horizontal Support line (early January breakout level).
Also, note the volume footprint. Be patient, let a few things improve here before considering a RSI buy this time - but certainly worth keeping a close eye on it.