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Chapter 6. RSI BAMM > British Pound/USD (GBP_A0-FX): Weekly Bearish Complex Ind...

British Pound/USD (GBP_A0-FX): Weekly Bearish Complex Indicator Structure

The example of a complex RSI structure in the British Pound shown in Figure 6.52 possessed all of the necessary elements to establish the RSI BAMM. As this chart example demonstrates, the initial test of the complex indicator formation typically experiences an acceleration of the predominant trend. Despite the perceived strength of the rally, the complex formation establishes the beginning of the most critical aspect of the entire RSI BAMM methodology—the divergence phase.

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Figure 6.52.

The bearish divergence occurs when the RSI reading weakens while the price action continues to rally. Although the price action may seem to be maintaining its current uptrend, valid complex RSI structures usually trigger a reversal sooner rather later and mark a critical area for a potential change in the overall direction. Although a few other elements must fall into place for the RSI BAMM to be validated, the complex RSI structure is the starting point for the entire process. Most important, this is an early signal, and it is critical to wait for the M-type structure to break under the 70 line. After the RSI formation has been completed, the other considerations of potential pattern completions and specific RSI BAMM harmonic measurements can be projected to determine the optimal reversal area. This leads us to our next step, which includes the defining and measuring of the price level that triggers this breakdown.


  

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