China's markets may be a hot topic for headlines, but did you know that its Shanghai Composite Index is still more than 50% off its 2007 high? Plus, the index has made no net progress since mid-2009.
In this sideways market, it can be difficult to identify near-term opportunities. Elliott Wave International's Asian-Pacific Short Term Update gives you forecasts and analysis for the Shanghai Composite three times per week.
On more than one occasion, the index provided Editor and 30-year-market-veteran Chris Carolan an opportunity to teach his subscribers about one of the three technical indicators he uses to confirm his Elliott wave analysis -- the Relative Strength Index (RSI). Here's one example.
RSI shows you the strength (momentum) of a market move and helps you find overbought and oversold conditions. Chris Carolan uses the indicator to look for divergences -- instances when prices make consecutive highs or lows while losing momentum, as indicated by the RSI. When combined with an accurate Elliott wave count, RSI divergences can help you see if a trend is ending -- or if a new one is about to begin.
RSI divergences are better seen than explained. In the chart of the Shanghai Composite above, the two green dots on the price chart point to two consecutive new lows. Now look at the green RSI lines -- see how they are pointing up while prices moved down? Although the market hit new lows, it did so with less momentum than before. That's a divergence, and, in this case, it signified the end of the trend.
Now look at the two red dots at the top of the next upward trend. This time, the market made two small consecutive highs. The RSI, however, tells a different story. The momentum of the highs was far less than during the bulk of the rally. This divergence suggested that the trend was ending -- and, in fact, it did as prices fell sharply.
This is just one part of applying RSI divergences to your favorite markets. You can learn more today about RSI and two more technical indicators in Chris Carolan's 42-minute, online video trading course, "3 Technical Indicators to Help You Ride the Elliott Wave Trend."
You can purchase "3 Technical Indicators" for just $49 here, but please don't! Get it FREE when you start a risk-free subscription to one of Chris' intensive market forecasting services -- and put a Charles H. Dow Award winning analyst to work for you.
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Chris puts your finger on the pulse of Asian-Pacific markets with near-term, chart-filled analysis of the Nikkei, ASX, Hang Seng, Shanghai Composite, S&P Nifty, MSCI Singapore, MSCI Taiwan, Kospi and more every Sunday, Tuesday and Thursday. Learn more>>
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Chris keeps you one step ahead of the trend in European markets with near-term, chart-filled analysis of the DAX, FTSE 100, CAC 40, Euro Stoxx 50, euro and other featured markets every Monday, Wednesday and Friday. Learn more>>
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(Already a subscriber to The Asian-Pacific Short Term Update, European Short Term Update or Global Market Perspective? Watch the trading course free here.)