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The Relative Strength Index (RSI) is a popular, 0–100 momentum oscillator used in technical analysis to measure the speed and change of price movements, helping identify overbought (typically >70) or oversold (<30) conditions. Developed by J. Welles Wilder Jr., it indicates potential trend reversals or corrective pullbacks.
Key Aspects of RSI:
Interpretation: An RSI above 70 suggests a security is overbought (potentially overvalued and due for a price correction), while an RSI below 30 indicates it is oversold (potentially undervalued and due for a rebound).
Calculation: The indicator measures average gains against average losses over a set period, typically 14 days.
Signals:
Divergence: Occurs when the price hits a new high/low, but the RSI does not, indicating a potential reversal.
Trend Confirmation: During a bull market, RSI tends to stay between 40 and 90, with 40-50 acting as support. In a bear market, it stays between 10 and 60, with 50-60 acting as resistance.
Usage: It is often paired with other indicators, such as Moving Averages or MACD, to filter out false signals.

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