🅱️ (₿) The Real Meaning Of A Bitcoin "Overbought" Daily RSI...

18 de jan. de 2023

The real meaning of the RSI numbers going above 80 is "strong".
The signal can be read as "strong" or "very strong".

RSI = Relative Strength Index.

• Below a certain level we consider weak/oversold.
  
• Above a certain level we consider strong/overbought.
  

It works with the trend.
You need some context for the RSI.

It can go to "overbought" and stay there for 6 months before dropping, as an example.

But if you see an "strong/overbought" signal and new lower highs start to show up or some bearish candlestick, bearish patterns, etc. -context- then you can take the signal.

Bitcoin can drop surely just as it can go up, but the RSI cannot be looked at on its own.

A good example can be seen by looking at the daily (D) RSI for Bitcoin (BTCUSD) around late October 2020. It went overbought while Bitcoin continued to rise through April 2021, almost six months.

When Bitcoin peaked in April 2021, the highest price in its history at that time, the RSI was far from overbought... You need to use it with the trend to maximize the benefits of this indicator.

Another example was the time between April and June 2019. Bitcoin goes overbought on the RSI and this precedes a bullish wave.

Then again in November 2015 the RSI flashed very strong/overbought and Bitcoin went on to print higher highs and higher lows until December 2017, more than two years of sustained growth.

An RSI that goes above 85 after a major downtrend has been a positive predictive signal for a newly starting bullish cycle.

I hope that helps.

Namaste.