Combining RSI With Gap Down Openings

Bob Kleyla | Tue, 02/12/2008 - 5:19am | Dow, gap, Gap down, Gap Down Openings, GS, RSI Strategy, SPY | Add a comment

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The SPY which tracks the S&P 500 has been trading since the early part of 1993. My research shows that when the 2 Period Relative Strength Index (RSI) closes below 10 and the SPY gap down 2% or more at the open of the next trading day substantial upside reversals have occurred.

Since 1993 there have been 7 occurrences when both of these paramters have been met as shown in the table below. The SPY have had an average gain of +9.4% within 5 trading days and +12.3% within 10 trading days when both of these conditions described above have occurred.

As you can see two major Buy Signals recently occurred on 1/22 and again on 1/23 which was followed by a gain of around +8% in the SPY within 5 trading days and +10% within 10 trading days.

Gap	Previous	%	Open	5	%	10	%
Down	Day	Gap	Price	Day	Return	Day	Return
Date	RSI	Down		High		High
1/23/2008	1.5	-2.7	127.17	136.76	7.5	139.61	9.8
1/22/2008	2.4	-4.3	126.40	136.76	8.2	139.61	10.5
7/24/2002	0.5	-2.3	77.78	91.05	17.1	91.2	17.3
6/26/2002	9.8	-2.4	94.85	100.15	5.6	100.15	5.6
9/21/2001	1.6	-4.7	93.70	102.05	8.9	108.62	15.9
10/8/1998	9.8	-2.7	94.21	101.46	7.7	108.37	15.0
10/28/1997	1.9	-2.4	84.78	94.03	10.9	94.93	12.0

Although there have only been 7 occurrences since 1993 when the above conditions have been met investors who recognized this setup could have made substantial gains in a very short period of time.

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Bob
Amateur-Investor.Net

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› Bob Kleyla

Amateur-Investor.Net has been providing Weekly Techincal Analysis of the stock market since late 1999 along with having a Stock Advisory Service. Their Advisory Service has both a Long Term and Short Term Strategy that focuses on those stocks which are developing a favorable chart pattern such as the Cup and Handle, Double Bottom with a Handle or Flat Base. Also they tend to focus on those stocks which are exhibting favorable Sales and Earnings Growth as well. In addition Amateur-Investor.Net provides a Daily ETF Timing Service as well which focuses on the Volatility Index (VIX) and Stochastics. For more information about them you can visit them at http://www.amateur-investor.net

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Combining RSI With Gap Down Openings

Bob Kleyla | Tue, 02/12/2008 - 5:19am | Dow, gap, Gap down, Gap Down Openings, GS, RSI Strategy, SPY | Add a comment

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