The RSI TFS system incorporates the “dead cat bounce” strategy as one of its components, but its applications are not restricted solely to that strategy.
The RSI TFS system can serve as a scalping technique, incorporating the effects of the dead cat bounce strategy. However, its potential is not limited to this strategy alone. Depending on the specific time frame and the asset being analyzed, the RSI TFS system can also indicate genuine price reversals or even trend shifts (although such occurrences may be less frequent).
What difference from the dead cat bounce?
The RSI TFS system can be utilized when the price is on an upward trajectory as well, meaning it is not exclusively designed for downtrends or reversal patterns.
What is a dead cat bounce?
A dead cat bounce refers to a price pattern commonly analyzed by technical analysts. It is classified as a continuation pattern, wherein the initial bounce might seem like a reversal of the current trend, but it is swiftly followed by a resumption of the downward price movement. The dead cat bounce phenomenon occurs when the price falls below its previous low, confirming that it is not a reversal.
Quite often, downtrends experience temporary interruptions characterized by brief periods of recovery or small rallies, during which prices temporarily increase. These intermittent price increases can be attributed to traders or investors closing their short positions or purchasing securities based on the belief that the security has reached its lowest point.
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