There is more to being overbought

Prices can stay ‘overbought’ for a long time.

In the chart below, the price of Hot Rolled Coil Steel (HRC) has been registering a RSI ‘overbought’ signal for 51 consecutive weeks.

The bands either side of the HRC price represent 3 standard deviations either side of its rolling weekly mean and the faint line hovering near the $850 mark is its 200 week moving average.

Albeit HRC is now trading at 122% above the 200wma and its price chart resembles a parabola, it hasn’t breached a 3 standard deviation level. It’s not registering the ‘extremes’ that I look for.

LNG prices on the other hand are blinking an interim peak and suggest a meaningful mean reversion.

LNG prices are trading at higher extremes than the already overbought Natural Gas price.

Look out for the next post.

September 29, 2021
by Rob Zdravevski
rob@karriasset.com.au

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