The relative strength index
(RSI) is another one of the most used and well-known momentum
indicators in technical analysis. RSI helps to signal overbought and
oversold conditions in a security. The indicator is plotted in a range
between zero and 100. A reading above 70 is used to suggest that a
security is overbought, while a reading below 30 is used to suggest that
it is oversold. This indicator helps traders to identify whether a
security's price has been unreasonably pushed to current levels and
whether a reversal may be on the way.
The RSI is most typically used on a 14 day timeframe. Shorter or longer timeframes are used for alternately shorter or longer outlooks. More extreme high and low levels—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum.
Divergence between RSI and price action is a very strong indication that a market turning point is imminent. Bearish divergence occurs when price makes a new high but the RSI makes a lower high, thus failing to confirm. Bullish divergence occurs when price makes a new low but RSI makes a higher low.
The RSI is most typically used on a 14 day timeframe. Shorter or longer timeframes are used for alternately shorter or longer outlooks. More extreme high and low levels—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum.
Divergence between RSI and price action is a very strong indication that a market turning point is imminent. Bearish divergence occurs when price makes a new high but the RSI makes a lower high, thus failing to confirm. Bullish divergence occurs when price makes a new low but RSI makes a higher low.
No comments:
Post a Comment