The relative resistance index (RSI), developed by J. Welles Wilder, is an impulse oscillator that measures the speed and change in price movements to assets evaluated of the robbed or undervalued conditions.
How to read RSI:
The RSI is shown as a line chart that ranges between 0 and 100 scale. Traditionally, the RSI is considered overwhest when it is above 70 and overall when it is below 30.
These traditional levels can also be adjusted if necessary to better adjust the asset or dynamics of the market.
For example, if an asset (or a security) repeatedly reaches the overcompra level of 70 (of observed duration chain trends), you may want to adjust this level to 80.
Note: strong duration trends, the RSI can remain in excess or overall for prolonged periods.
Operators seek support or resistance using the RSI graph. In an upward trend, RSI tends to remain in the range of 40 to 90 with zone 40-50 that acts as support. Duration A bassist trend, RSI tends to remain between the range of 10 to 60 with zone 50-60 that acts as resistance. These ranges will vary according to the RSI configuration and the strength of the asset (or security) or the underlying markets.
In addition to indicating support or resistance levels, RSI also forms graphic patterns that can suggest price reversions. A price investment is identified when the price moves in the opposite direction of the RSI. As you can see in the table below, there is a bull divergence when the RSI minimum form higher in the presence of lower minimums formed by the price. In the same way, a divergence of Bearerish occurs when he observes the formation of higher minimums for the price in the presence of lower minimums formed by the RSI.
PD: For swing failures: if the RSI rises and then continues with a downward movement below a previous bass, there has been a higher oscillation failure. If the RSI makes a lower high and then continues with an upward movement above a previous maximum, there has been a lower oscillation failure.
