Today I will show your guy a great example of when I find a formation on my graphs and I use RSI trend lines (TL) to give me more support and open a trade.
Bellow you can see my $USDOLLAR 4hr chart which is showing my a bearish flag.
Keep in mind that flag needs to hold bellow the 0.50% fib of the last move. Which in this case is from 12058 (0% fib) to 11947 (100% fib). At the moment we are just touching that fib which is a great thing because my stop loss will be very close to my entry if I do trade.
So after I find a formation, I will look into my RSI to add trend lines so I can use them as an alert when they do break TL.
So above you can see my work on RSI. I added those small circles for you to know what points I looked when I saw the RSI, so by looking those points I added 2 TL and worked amazing! Very clear indeed!
Now what is my trading plan?
As I can see a bearish flag on my chart, I will wait for him to slide and break my RSI's trend line which will give the market even more pressure to short this market.
If he does not break down and start going higher (above 12010), I will delete everything about this flag and be away as the flag got cancelled. This especially happens when some data is out.
Take profit level?
My take profit level will be the measurement of the flag which is the size of the last move of the flag which is the same levels of the fib which I mentioned above. I normally add that arrow and then cloned and put on my graph to not make me forget. So my take profit here will be 11900.
Stop loss?
Very close, 12010. Which is the last high and also above the flag/channel line.
Now, all I need is to be patient and wait for this market to come down and break my RSI trend line for me to jump in.
I hope it plays out!
By Thiago Duarte
Chief Strategist at Duarte Investment Group
thiago@duarteinvestmentgroup.com
@thiagotrader
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