ACTA - an example of divergence 26.10.2007

Since summer this year Acta has been in a downward moving trend. The question we can ask is if the trend is coming to an end and if the stock price can start rising again soon?
Looking at ADX the value (34) indicate a relatively strong trend, and from the fact that -DI is higher than +DI we can without looking at the price curve say that the trend is negative. If we draw the trend channel for the price chart everything suggest that the downward movement will continue as before. Drawing the trend channel for RSI and putting it in relation with the price chart we see something interesting. The support line for RSI is rising while the support line in the price chart is falling - there is a divergence between the price movement and the RSI movement. When we see this it is usually a very positive signal indicating that the downward movement in price is coming to an end, and a rise can come in the near future. If RSI bounce up again without forming a lower bottom than the last one (the bottom defining the trendline) this will further strengthen our analysis that we can expect a rise in price soon. Therefore the critical level to pay attention to now first is the level that is defined from the support line for RSI. The RSI value must not end lower than value for the trend line.