Understanding RSI in Technical Analysis

In technical analysis, overbought and oversold conditions signal that an asset's price has moved too far in one direction, making it vulnerable to a correction or mean reversion. The Relative Strength Index (RSI), which ranges from 0 to 100, uses default thresholds of 70 for overbought and 30 for oversold.

An RSI reading above 50 typically indicates growing bullish momentum and supports the possibility of an upward trend. Conversely, a move below 50 suggests increasing bearish pressure and the potential for further downside.

RSI Behavior in Trending Markets

Traders often interpret RSI differently depending on market trends. During uptrends, RSI commonly fluctuates between 40 and 70, with readings above 70 indicating strong momentum rather than an impending reversal. In such cases, traders may seek buying opportunities when RSI dips to around 50, as drops below 30 are rare.

In downtrends, RSI usually remains below 60, and oversold readings (below 30) occur more frequently. Rather than expecting quick rebounds, traders often view RSI rallies toward 50–60 as chances to sell, treating the RSI as a form of dynamic resistance.

By adjusting RSI thresholds according to market conditions, traders can better align their strategies with prevailing trends, avoiding premature trades based solely on standard RSI levels.

So RSI value at 70+ => Overbought
RSI value at 50-70 => Bullish momentum

RSI value at 50-70 => Bearish momentum

RSI value at below 30=> oversold

Let me know if you have any questions

Overbought