Beware when someone use RSI to predict a 'big fall" in SIA share price
Recently some so-called experienced traders made alarming comment about SIA share price - "big fall" and "drop by 10-20%". They quote articles to make the point and RSI indicator is mentioned frequently.
First RSI indicator is more reliable for long-term trend. For SIA stock, the uptrending started about a month ago - not qualify as long term. Second RSI indicator is not suitable for uptrending (or downtrending) market. When there are some intrinsic values or macro factors (e.g. the company is growing) that support the uptrending, a price reversal or pull back will not occur. In such case, the stock can stay overbought (or oversold) for a long time.
RSI indicator only forecast if a stock is overbought (or oversold) and don't predict if the share price will crash. "drop by 10-20%" will mean price fell to about a month ago is wild guess and FUD. Hence there's no need to panic sell if the share price experiences a small correction which happens frequently.
Quote:
The RSI compares bullish and bearish price momentum and displays the results in an oscillator placed beneath a price chart. Like most technical indicators, its signals are most reliable when they conform to the long-term trend.
True reversal signals are rare and can be difficult to separate from false alarms...A false negative would be a situation where there is a bearish crossover, yet the stock suddenly accelerated upward.
Since the indicator displays momentum, it can stay overbought or oversold for a long time when an asset has significant momentum in either direction. Therefore, the RSI is most useful in an oscillating market where the asset price is alternating between bullish and bearish movements (not useful for trending market).
True reversal signals are rare and can be difficult to separate from false alarms...A false negative would be a situation where there is a bearish crossover, yet the stock suddenly accelerated upward.
Since the indicator displays momentum, it can stay overbought or oversold for a long time when an asset has significant momentum in either direction. Therefore, the RSI is most useful in an oscillating market where the asset price is alternating between bullish and bearish movements (not useful for trending market).
Source:
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I reflected trading experiences by writing journals. My comments are for educational purposes not financial advice.
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CᖇYᑌI᙭ : C6L just gonna undergo some cooldown before it just keeps climbing. Kinda of no brainer, and doesn’t need any RSI or chart to predict lol.
ZnWCOP CᖇYᑌI᙭: I agree with you share price may experience small correction and stay at current price. What he just commented that "party over, go back to earth".
CᖇYᑌI᙭ ZnWCOP: I used to work for SIA, and also an aviation analyst. SIA plays a good strategy in the industry leading the moves. The results of too many scholars working their bonds within the company. The company recovers far better than the middle eastern carriers which are heavily subsidised or should I say better subsidised (SIA is and was also under subsidy from our State). Can read IATA forecasts and SIA’s interim, I expect the price to reach at least $10 by the end of FY (Apr ‘24). After serving all the bonds and whatever was owed during the pandemic, it shall fly high towards but still quite pessimist about breaking historical high in the next couple of years. Aviation is not a lucrative business afterall.
ZnWCOP CᖇYᑌI᙭: Thanks for the sharing. I understand your pessimism and reservation. SIA needs a leader with vision and courage to think out of the box.
CᖇYᑌI᙭ :
geda : The stock once rose more than 2% and is expected to rise for the 10th consecutive trading day. Currently, the stock price is still 45% lower than the all-time high set in 2000.