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34
Chart 8 (below) has 5 years of data displayed (select the “5 Years of Data” button). We have applied the
technical study RSI to the last Chart 7 after first removing the clutter of all the individual cycles by
selecting “Synthesis” in the Cycle Plot frame.
Several divergences between price and RSI are highlighted. As with almost any technical tool, you
cannot count on the accuracy of the tool in every situation, but divergences are important findings that
alert you and raise questions about the sustainability of the current move. The difficulty is that in real
time divergences sometimes begin to form and then abort as prices drive right through levels you
thought would be support or resistance, and drive right past time frames that time cycles suggested are
periods of likely price reversal.
A good analyst has a number of tools for examining a market, and hopefully ones that look at the market
from different or unrelated perspectives, much as the Techsignal™ program has done. But, in the final
analysis, the best managers are those who protect their capital first regardless of their tools and analysis
methods. They protect their capital through the use of stop loss points, limiting how much capital they
are willing to risk on any one position. There are times when we simply have to say we don’t
understand, but usually those situations clear themselves up fairly quickly, and you can get back on
board as long as you still have something to get back on board with.
Chart 8
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