Why Is RSI Important?

Generally, when the RSI indicator crosses 30 on the RSI chart, it is a bullish sign and when it crosses 70, it is a bearish sign. Put another way, one can interpret that RSI values of 70 or above indicate that a security is becoming overbought or overvalued. It may be primed for a trend reversal or corrective price pullback. An…

During trends, the RSI readings may fall into a band or range. During an uptrend, the RSI tends to stay above 30 and should frequently hit 70. During a downtrend, it is rare to see the RSI exceed 70. In fact, the indicator frequently hits 30 or below. These guidelines can help traders determine trend strength…

The RSI compares bullish and bearish price momentum and displays the results in an oscillator placed beneath a price chart. Like most technical indicators, its signals are most reliable when they conform to the long-term trend. True reversal signals are rare and can be difficult to separate from false alarms. A false positive, for example,…

Another trading technique examines RSI behavior when it is reemerging from overbought or oversold territory. This signal is called a bullish swing rejection and has four parts: As you can see in the following chart, the RSI indicator was oversold, broke up through 30, and formed the rejection low that triggered the signal when it…

After the RSI is calculated, the RSI indicator can be plotted beneath an asset’s price chart, as shown below. The RSI will rise as the number and size of up days increase. It will fall as the number and size of down days increase. As you can see in the above chart, the RSI indicator…

An RSI divergence occurs when price moves in the opposite direction of the RSI. In other words, a chart might display a change in momentum before a corresponding change in price. A bullish divergence occurs when the RSI displays an oversold reading followed by a higher low that appears with lower lows in the price. This may…