Relative Strength Index (RSI)
is a that measures the speed and magnitude of recent price changes, scaled from 0 to 100. RSI above 70 suggests the is — potentially due for a . RSI below 30 indicates conditions — a potential bounce. The default look-back period is 14 days.
RSI above 70 = overbought. RSI below 30 = oversold.
MACD — Moving Average Convergence Divergence
compares two (typically 12-day and 26-day). The MACD line crosses above the signal line as a signal; crossing below is . The histogram shows the difference between the two lines, making divergence easy to spot.
Divergence — when price and momentum disagree
divergence: price makes a new low, but makes a higher low — selling is exhausting. : price makes a new high, but RSI makes a lower high — buying is fading. Divergence is an early warning signal before reversals.
Divergence often predicts trend reversals before price confirms.
Combining indicators
No indicator works alone. A can stay for weeks in a strong . Use and as supporting evidence, not standalone buy/sell signals. Combine them with , , and fundamental context for stronger conviction.