QuantitativeExhaustion

Price and Indicator Analysis

CBOE:TYX   TREASURY YIELD 30 YEARS
In this chart I used US 30 Year Treasuries weekly chart to explain how price and indicator analysis work.

I cover the basis of divergences, pullbacks, throwbacks, and exhaustion spikes.

Pullbacks (red) are seen when price and indicators such as RSI have diverged for a great length (wide divergence) or when you have weak divergence top comparing price and RSI . Throwbacks (blue) have the same effect, however show up when you have a bottom divergence or exhaustion spike.

If you notice wide divergence tops or bottoms more than often develop a stagnant price pullback/throwback. This is important to understand for timing purposes with instruments such as options.

When you have a weak major divergence top or bottom, there is usually a strong pullback/throwback occasionally surpassing the original price top / bottom.

Exhaustion spikes often happen after strong pullbacks and pullbacks that price sideways for a long duration. Exhaustion spikes are difficult to call bottoms or tops because they can lead to large price moves. To find an exhaustion bottom it is best to look on a much smaller time frame for strong angle divergences.

For TYX             I am waiting to see a rapid price movement to the downside or a divergence signal with a lower bottom in price and a rising divergence indication.

1M Chart


2W Chart


1W Chart


1D Chart


3H Chart


1H Chart


30 Min Chart / Waiting for Overbought - Divergence Signal


5 Min Chart / Waiting for Overbought - Divergence Signal
+7 Reply
what is your RSI setting?
+1 Reply
1D




Hello Seine

I use both RSI 14 and RSI 50. I use two because one will display the magnitude of an exhaustion spike much better (RSI 14) than a longer length RSI. With a longer length RSI, like RSI 50, I find it much easier to scan charts for divergences.

1H
+7 Reply
seine QuantitativeExhaustion
thank you :) very interesting,
Reply


Other observations when comparing RSI 14 and RSI 50.
+7 Reply
seine QuantitativeExhaustion
which one is more reliable? on the left there is false divergence on rsi 14 and on the right rsi 14 shows the divergence but not the rsi 50. rsi 14 divergence caused a pullback which is not foreseen through rsi 50. Which one do have you found more reliable in your experience?
+4 Reply
It's not a question of reliability, you have to understand the indicators length ( ). RSI 50 is reading a longer length so your going to get a much smoother relative strength indication, where as RSI 14 is shorter in length so your going to generate amplification/higher frequency. As you can see in the chart above, your best indications is when both are suggesting divergence, overbought - oversold, exhaustion. Now if you see an exhaustion spike on any time interval, it's best to examine the spike with a smaller time frame. I find RSI 14 is best suited for examining exhaustion spikes.
+8 Reply
seine QuantitativeExhaustion
nice!
Reply


Here is an example examining an exhaustion spike using a 3 min chart with Silver ETF SLV. RSI 50 gave you an overbought signal and RSI 14 gave you divergence reading. You know the throwback is going to be weak because both RSI 50 and RSI 14 did not give you a divergence / overbought signal.


Looking at a 30 min scale, you can see both RSI 50 and RSI 14 gave you a clear divergence signal. I did expected a weak pullback, and that's what we got after the initial gap down.

Using this method I traded SLV weekly options, Jan. 30th 17.00 strike for a 1050% gain.
+7 Reply


After examining the 1h and 30 min, I went to look for further details of a possible top. On 3 min chart we see double divergence and overbought signals for both RSI 50 and RSI 14.
+6 Reply
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