Macquarie Group RSI Strategy

Macquarie is a high-beta diversified financial whose earnings swing with markets, commodities and deal flow, so it frequently reaches RSI extremes (both oversold and overbought). These extremes create tradeable opportunities. The stock also tends to mean-revert after results-driven or market-shock extremes, making RSI particularly effective for timing entries and exits.

Mean reversion fades extremes - buy when RSI is oversold, sell when overbought. Momentum trades in the RSI direction - buy when RSI shows bullish momentum (above 55), sell when bearish (below 45). Use mean reversion in ranging markets and momentum in trending markets.

RSI can stay oversold for extended periods in strong downtrends. Buying at RSI 30 is 'catching a falling knife.' Waiting for the crossback (RSI going above 30 from below) confirms that selling pressure has actually stopped and a reversal is beginning.

Impairments (and provisions) are charges Macquarie takes when loans or investments are expected to lose value - for example, rising bad debts in its lending book or write-downs on principal investments. Higher impairments reduce profit and can weigh on the stock. For Macquarie, big swings in its markets/commodities trading income can move the stock even more than impairments do.

Divergence occurs when price and RSI move in opposite directions. Bullish divergence: price makes a lower low, RSI makes a higher low - signals selling exhaustion, potential reversal up. Bearish divergence: price makes a higher high, RSI makes a lower high - signals buying exhaustion, potential reversal down.

In high volatility (ATR percentile > 75), use wider bands (25/75). In low volatility (ATR percentile < 25), use tighter bands (35/65). In strong uptrends, use 40/80 since RSI rarely reaches 30. In downtrends, use 20/60 since RSI rarely reaches 70.

Macquarie sits in the ASX 200 Financials index but, because so much of its income is global and markets-driven, it correlates with the index only moderately (often ~0.6-0.7) and can diverge from the bank-heavy sector. If Macquarie is oversold but the index isn't, it may be a company/markets-specific driver - don't blindly buy. If financials are broadly oversold, it's more likely a sector selloff and a quality-stock opportunity.

ITM calls/puts (delta 0.65-0.75) or vertical spreads work well. Mean reversion expects quick 5-8% moves resolving in 5-10 days. ITM provides good delta with manageable theta. Spreads define risk and work well when IV is elevated after selloffs or results.

Volume shows conviction. An RSI oversold bounce with high volume (>1.5x average) means institutions are buying - a stronger signal. A low-volume bounce may fail. Similarly, RSI reaching overbought on declining volume shows exhaustion buying - reversal likely. Volume validates or questions RSI signals.

Weekly RSI sets the directional bias (above 50 = bullish environment). Daily RSI generates signals (extremes, crossovers, divergences). Hourly RSI fine-tunes entry. Best trades occur when all three timeframes align. Don't fight the weekly direction with daily mean reversion unless the weekly is also at an extreme.

A failure swing is when RSI fails to make a new extreme after an initial extreme. Bullish: RSI drops below 30, bounces, pulls back but stays above 30, then breaks the bounce high. It shows internal strength. Trade it by entering when RSI breaks the reaction point. These often precede strong moves because momentum has already shifted internally.

Optimise the RSI period (9/14/21) and thresholds (28/72 is often a good starting point). Add a signal quality score (RSI extremity, volume, sector, multi-timeframe, divergence). Classify the regime (ADX > 25 = momentum, < 20 = mean reversion). Backtest over 5+ years. Illustrative targets: win rate > 55%, profit factor > 1.8, Sharpe > 1.0. Validate on out-of-sample data before trading.

Typically sector alignment (ASX 200 Financials RSI) and volume ratio show the highest feature importance. This confirms traditional wisdom - sector context and volume confirmation matter most. The RSI value itself is necessary but not sufficient. ML captures interactions like 'RSI < 30 + high volume + financials sector oversold = high probability.'

Mean reversion: delta 0.65-0.75 (ITM), quick moves benefit from some gamma, minimum 15-20 DTE. Momentum: delta 0.55-0.60, roll higher as the move progresses, use the next monthly series. Use spreads when IV is elevated (percentile > 60) to neutralise vega. Calculate theta impact before entry.

Base allocation 6-8% of portfolio, max 10% for high-conviction RSI signals. High historical VaR - size to contribute a proportional share of portfolio VaR. Strategy drawdown limit -18% (accommodates high beta). Scale position size to the signal quality score (Score 8-9: 100%, 6-7: 75%, 5: 50%, <5: no trade).