Hello Near Merchants!
We will be looking a little deeper at the NEARUSDT 1Day chart and try to determine what could likely be the next move for Near. Our basic indicator and technique would be the Relative Strength Index (RSI), chart patterns and applications of the RSI divergences.
First of all, I’ll walk you through the use of the Relative Strength Index (RSI) Indicator. You may already know how to use this indicator to determine when the market is relatively Overbought or Oversold. For any of the overbought or oversold conditions, we will have to trade in the opposite direction of the current market in order to stay in the profitable market zone.
The Relative Strength Index (RSI) is an indicator developed by Welles Wilder who was an American mechanical engineer, turned real estate developer. He is best known, however, for his work in technical analysis. The RSI is a very popular momentum indicator. One of its uses is to signal overbought/oversold conditions in a security. A security is overbought when it has risen too far and too fast above the 70 region while it is considered to be oversold when it falls below the 30 region. The 30 and 70 regions are the default oversold and overbought regions respectively. These regions are often considered to be a warning that the security will soon correct by a change in market direction. A security is oversold when it has dropped too far too fast to the 30 region, and this is often considered to be a warning that it will soon rise. Watching for these conditions, traders will sometimes place a contrary bet in the hopes of profiting when the stock rises or falls.
The diagram below shows clearly the positions of the RSI in both overbought and oversold market conditions. At positions above 70 on the RSI window shows that the market is already overbought while at positions below 30 shows that the market is oversold.
Most traders consider these overbought and oversold regions as trend reversal triggers while more professional traders would always look out for better triggers with the RSI than just the overbought and oversold conditions.
In this analysis, we’ll try to spot the right triggers for trend reversals using the RSI divergences.
First of all, let us consider different situations with the RSI. The RSI could be indicating that a security is overbought and still continues to buy or could be indicating an oversold condition and still continues to sell. These could be as a result of certain abnormal conditions referred to as the bullish divergence or the bearish divergence.
Let us begin with the bearish divergence. The diagram below shows a bearish divergence.
The diagram above shows points A and B on the price chart corresponding to C and D on the RSI. Points A and B indicates that the trend is bullish and should probably continue its bullish movement while points C and D on the RSI oscillator is bearish. The market usually moves in the direction of the RSI oscillator.
Another scenario is shown below where the price chart shows a bearish pattern against a bullish channel on the RSI oscillator. These are typical examples of bullish and bearish divergence.
Now let’s observe the points P and Q on the price chart where P is at a higher price position than Q. Also, the points R and S on the RSI window which correspond to P and Q respectively. Here, R and S are rather on a straight line.
This case is not a divergence but a proof that the trend lines joining the points P and Q is correct and would take effect to produce a downward movement.
Here is a practical application of the bullish and bearish divergence.
The points E and F on the price $NearUsdt price chart corresponds to G and H on the RSI oscillator. There is a bullish and bearish divergence here which would likely result in a bullish price movement. An estimated price reach for $Near would be $7 to $8.4.
This is not financial advice but for educational purposes.
Good luck Merchants!