RSI and Stochastic -Trade Signal

Trading price pull back and retracement with RSI and Stochastic

How do we know that it is a price pull back or retracement for sure?
These two indicators must be stacked up on top of each other as in the chart below.

Relative strength index as its known, is the intelligent one of the two indicators – why? Because it does not always follow Stochastic on its false and misleading merry travels.

So how do we read into this?

In the above chart the price is in a downtrend and retraces at yellow ball (added marker), Stochastic at this point has peaked, at the same time the relative strength index is hovering in the bearish territory or on the bearish/bullish border line and does not follow Stochastic all the way up!

So what does this mean exactly?

The relative strength index is giving a strong signal that the price is about to continue in its former downtrend!

The further away that Stochastic has travelled north in relation to the relative strength index - the more powerful the price reversal and return back to the bearish territory to continue the original trend

The above statement will hold true for “shorts” only - the EMA200 must be above all this activity and the relative strength index must be in bearish territory.

When the above conditions are met, trade the "short" SAR signal only after a bearish candle closes below the 8MA. Click on video.

Obvious shorting signals in the chart are upper Bollinger band spiked (overbought), relative strength index and Stochastic indicating strong bearish sentiment and Moving averages are stacked up in the right order for a downtrend!

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