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Chapter 6. RSI BAMM > Specific Type of Retest

Specific Type of Retest

One of the most critical aspects of this divergence phase occurs during the initial reaction following the complex RSI structure completion. After the Trigger Bar has been established, the RSI reading MUST decline to at least the 50 level before completing the final divergence—where the price rallies while the RSI fails to exceed the readings established by the prior complex indicator formation. Although there is room for interpretation as the RSI reading may exceed the 50 level on this initial reaction, it serves as a minimum requirement that precedes the corresponding retest of the resistance area established by the RSI BAMM (see Figure 6.57).

image

Figure 6.57.

Again, this specific type of retest offers other short-term trading opportunities that I will explain a bit later in this chapter. But, the important aspect of this element of the process is a minimum retest to the mid-point (50) level of the RSI. At this point in the RSI BAMM methodology, the price action typically declines fractionally while the indicator experiences a sharp correction. So, it is essential to focus on the indicator reading. After the mid-point 50 limit is tested, the final divergence phase of the entire approach will begin.


  

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