Figure 4: MFI Resistance

Figure 4 shows how the price movement of Seksun was resisted at the MFI resistance level. The first peak on the MFI chart occurred in Jan’07. Subsequent testing of this peak was unsuccessful with the price retracing soon afterwards. Hence, we would expect this MFI level to provide strong resistance in future. Near those levels, the trader must be more careful in monitoring their holdings.

This article has highlighted how MFI can be used to identify weaknesses in an uptrend or downtrend through divergences. With this knowledge, readers can then better anticipate and act to protect their investments. MFI can further be used to identify support and resistance levels where the stock price is expected to react thus enabling investors to time their entries and exits with higher probability.