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New Concepts in Technical Trading Systems, originally published in 1978 by J. Welles Wilder, is an excellent book to dig into technical analysis. One of Wilder’s most well known indicators is the Relative Strength Index (RSI).

The RSI is an oscillator that measures the velocity of directional price movement. When it moves up very quickly, eventually it will be considered overbought, the opposite for oversold. In these scenarios, a reversal may be forthcoming. In addition, the RSI is often used to view areas of divergences.

Here’s how Wilder defined the RSI:

RS = Average of 14 day’s closes up / Average of 14 day’s closes down

RSI = 100 – (100 / 1 + RS)

In the latest release of my RS Line indicator for TradingView, I’ve added support for a visual callout when the RS Line has reached a new high before the stock price is at a new high.

Historical research of past big winners has shown that an RS Line at a new high before the price reaches a new high, may proceed a significant move up. This very bullish signal is now much easier to identify.

Examples of New High Callouts

There are two visual callouts that have been added to the RS Line indicator. First is the RS Line hitting a new high before the price hits a new high. Here’s how the indicator looks when RS Line is at a new high before the price, the example is from EBay in 2003.

I’m a huge fan of Investors.com MarketSmith charting application. Their implementation of a Relative Strength Line (RS Line) is my go-to indicator.

In MarketSmith, the RS Line represents a stock’s performance versus the S&P 500. If you are looking at a weekly chart, the RS Line is the performance of the stock over the past week versus the S&P 500 over that same time frame. The same logic applies to the daily and monthly charts, only the time frames are different.

If a stock moves up for the day/week/month and the S&P 500 does not, the RS Line will move up. If a stock ends the day/week/month flat, yet the S&P 500 moves up, the RS Line will go down.

3 weeks tight is a bullish continuation pattern first documented by IBD’s founder, William O’Neil.

The pattern can used as an opportunity to add to an existing position as it often occurs after a breakout above a cup with handle or other technical pattern.

Head over to TradingView to install the Three Weeks Tight indicator

The 3 weeks tight pattern forms when a stock closes within approximately 1% to 1.5% of the prior week’s close for at least two weeks. The reason for the bullishness is that it indicates that investors who moved the stock upward in price since the breakout are not taking profits, the price is holding steady.

The buy point is just above the area of resistance formed at the highs of the three weeks plus 10 cents. The ten cent addition to the price is to ensure a push through the resistance at the high of the range.

Webby’s RSI (really simple indicator) is a technical indicator to gauge the health of an uptrend. The concept of Webby’s RSI and the original implementation was created by Mike Webster. In this post I’ll share a Pine Script version of Webby’s RSI that you can use on TradingView.

Webby’s RSI, most often used with the Nasdaq Composite, is the percentage of the low vs. the 21-day moving average. At the beginning of a bull market, the higher the value, the better.

If you are familiar with TradingView and would like to install the indicator, you can find Webby’s RSI here.

Before we get into the code, here’s how Webby’s RSI looks as originally developed by Mike:

The track price in MarketSmith can be used to view a stock’s price in relation to various moving averages. The downside is that the information is not displayed directly on the chart, you must right click for each symbol to view the stats.

I’ve written thinkscript that will display the distance above or below either the 21-day exponential moving average or the 10-week simple moving average. If you are viewing a daily chart you’ll see the former, when on a weekly chart, the latter.

I’ve also added information that indicates the price for a specific percentage below the moving average. The percent below can be configured using the Inputs and Options dialog in thinkorswim.

One very helpful gauge within MarketSmith is the RS Line, which represents a stock’s performance versus the S&P 500. As growth traders, we look for an upward trending RS Line.

In addition to MarketSmith, I also use thinkorswim, as I can write scripts to customize the charts, do back-testing and otherwise tinker with the UI. I thought it might be a nice addition to my workspace to show an RS Line indicator.

A position size calculator can help you focus on fundamental and technical analysis without getting bogged down in repetitive tasks such as determining the number of shares to buy and the resulting position size. Let me explain.

Before I enter a trade, there are a few things I always know up front: how much I am willing to risk as a percent of my equity, where my original stop will be set, and my first target to consider taking profit (full or partial).

As far as a stop, based on my research of previous chart patterns as well as my own trades, I often find that a break of a moving average is a good place to consider a stop.