ULVR RSI Strategy

Unilever is a stable, defensive stock with strong mean reversion tendency. RSI extremes are rare but reliable. When RSI reaches oversold (<30), the stock almost always bounces. High win rate for mean reversion.

RSI < 30 typically occurs 2-4 times per year. Because Unilever is so stable, reaching oversold is meaningful. These events are often caused by market-wide selloffs or sector rotation.

During risk-off periods, investors buy defensive stocks for safety. This 'defensive bid' can keep Unilever elevated (overbought) for extended periods. Shorting defensives generally has lower probability.

Use 2× ATR below entry for longs, above for shorts. Despite being defensive, Unilever can decline on company-specific issues. Always use stops. Exit if RSI fails to recover.

20 days maximum for RSI trades. Mean reversion should work relatively quickly on stable stocks. If no progress by 20 days, the signal may have failed or new information has emerged.

Risk-off rotation: money flows to defensives like Unilever, can keep overbought levels extended. Risk-on rotation: money leaves defensives, can create oversold opportunities. Context is crucial.

Bullish divergence: price makes lower low but RSI makes higher low (weakening selling). Bearish divergence: price makes higher high but RSI makes lower high (weakening buying). Powerful reversal signals.

~60% of revenue is non-GBP. Strong GBP hurts reported earnings (translation). Weak GBP is favorable. If oversold is currency-driven rather than fundamental, consider the signal's strength.

~60% of revenue from emerging markets. EM provides growth but also risk. EM currency volatility and political issues can pressure Unilever. EM weakness can cause oversold conditions.

Weekly RSI provides major context. Daily gives signals. Weekly oversold + daily oversold = strongest buy (very rare for Unilever). Weekly overbought + daily overbought = reliable exit.

Gain = Max(Close - Close[1], 0), Loss = Max(Close[1] - Close, 0). AvgGain/AvgLoss = 14-period average. RS = AvgGain/AvgLoss. RSI = 100 - (100/(1+RS)).

Buy calls at RSI < 30 for defined-risk long. Covered calls when RSI > 60 for income (2-3% + 3.5% dividend = 5.5-6.5% yield). Cash-secured puts to enter at lower price.

Unilever has pricing power but limits exist. Moderate inflation: can pass through costs. High inflation: consumer pushback may hurt volumes. Factor into RSI analysis - inflation-driven oversold may be structural.

Unilever is ESG leader - supports valuation. ESG controversy can pressure stock. ESG-driven oversold may persist longer. ESG funds are significant owners - their flows matter.

Per-trade: 2% risk. Total Unilever: max 5%. Consumer staples: max 15%. Total defensives: max 25%. Correlates with other defensives - manage combined exposure.