RSI OFFERING SOME VALUABLE INSIGHTS ON 2-DAY TF CHART OF CNX500

The broader market, CNX 500, on this 2-day timeframe (I had to use this timeframe as the platform doesn’t accommodate complete data on daily timeframe and identified some surprising structure) when Momentum Indicator, RSI (standard 14 period) breaches below 25 and turns up that indicates the end of the market crash, and the beginning of a new uptrend. Of course, RSI doesn’t go below 25 that often, except in severe crashes. Since 1999 (when the index was introduced) there were only 3 such occasions – the dotcom crash, the Financial Crisis crash, & the Covid crash. Important point to note is that this tendency of momentum extreme on the other side – RSI above 75 - does not indicate any such reversal of the uptrend. For example, after the Covid crash RSI went above 75 over half-a-dozen times but the trend has been intact. Pl. check the chart.

Disclosure: I have not checked the validity of this structure on other indices or securities. For now, this is just for the CNX 500. On the Nifty 50 also it is mostly true though not as clear cut as that for the CNX 500.

Comment:

Please note this is purely personal observation on personal analysis, and no recommendation whatsoever.