TSI Analysis & TSI Signals

Trend Strength Indicator

Developed by William Blau

TSI is a momentum indicator. The TSI is drawn by using a momentum calculation that reacts faster and is more responsive to price changes, making it a leading indicator that follows price action direction closely in the market.

The TSI is drawn as a blue line, the indicator also plots a signal line which is drawn as a red-line, & these 2 lines are used to generate cross over signals.

TSI also plots a histogram which shows the difference between the TSI Line and the Signal Line. This histogram crosses above or below the center lines, histogram levels above the center line shows a bullish cross-over signal, while center line levels below the center line shows a bearish crossover signal.

Stocks Analysis & How to Generate Signals

The TSI uses various methods to generate signals. This indicator can be used in the same way as the RSI to determine general trend direction of the markets. Overbought and oversold levels can also be shown using TSI. The most common methods of generating signals are:

Zero line Stock Cross Over ( Histogram Stocks crossover not Lines Stocks crossover )

• Buy - when the histogram crosses above the 0 a buy is generated
• Sell - when the histogram crosses below 0 a sell is generated

Trading Signal line Stock Trading Crossover

• A buy is generated when TSI line crosses above the Signal Line
• A sell is generated when TSI line crosses below Signal-line

This signal is the same as the one above & the timing corresponds to the time when the histogram crossovers happen.

Divergence Stocks

Divergence is used to look for potential trend reversal point of a stocks. The reversal divergence setups are:

Classic Stock Divergence

Stocks Classic Bullish Divergence: Lower lows in price and higher lows on the indicator

Stocks Classic Bearish Divergence: Higher highs in price and lower highs on the indicator

Divergence trading can also be used in identifying potential trend continuation points in price action direction. The continuation divergence setups are:

Hidden Stocks Divergence Setup

Stocks Hidden Bullish Divergence: higher lows in price and lower lows on the indicator

Stocks Hidden Bearish Divergence: lower highs in price and higher highs on the indicator

Oversold/Overbought Levels on Indicator

This can be used to identify overbought and oversold conditions in price action movements.

• Overbought condition - levels being greater than the +25 level
• Oversold condition - levels being less than the -25 level

Trades can be generated when the TSI crosses these levels.

Buy signal - when the areas cross above -25 level a buy is generated.

Sell signal - when the levels cross below +25 level a sell is generated.

Oversold

Overbought

The overbought/oversold levels are indicated using horizontal lines drawn at the +25 & -25 levels.