Many traders think that an extreme overbought/oversold reading indicates a stock index top/bottom.
Very often espicially with a rising stock index, an extreme RSI reading implies continuation of the trend.
Note in late 2019 the persistant bull trend had a very overbought reading, yet the final top wasn't in place until a double bearish RSI divergence.
The same phenomenon happens in down trending stock indices - note the double bullish RSI divergence in 2020.
Bearish RSI divergences are less common with individual stocks because they have a greater chance for blowoff tops.
When looking for a stock index top be patient, wait for at least one RSI bearish divergence before selling.
Mark
Very often espicially with a rising stock index, an extreme RSI reading implies continuation of the trend.
Note in late 2019 the persistant bull trend had a very overbought reading, yet the final top wasn't in place until a double bearish RSI divergence.
The same phenomenon happens in down trending stock indices - note the double bullish RSI divergence in 2020.
Bearish RSI divergences are less common with individual stocks because they have a greater chance for blowoff tops.
When looking for a stock index top be patient, wait for at least one RSI bearish divergence before selling.
Mark
כתב ויתור
המידע והפרסומים אינם מיועדים להיות, ואינם מהווים, ייעוץ או המלצה פיננסית, השקעתית, מסחרית או מכל סוג אחר המסופקת או מאושרת על ידי TradingView. קרא עוד ב־תנאי השימוש.
כתב ויתור
המידע והפרסומים אינם מיועדים להיות, ואינם מהווים, ייעוץ או המלצה פיננסית, השקעתית, מסחרית או מכל סוג אחר המסופקת או מאושרת על ידי TradingView. קרא עוד ב־תנאי השימוש.