The Relative Strength Index, one of the most popular technical indicators in market analysis, reached extremely low values previously observed in March 2020, caused by the global financial crisis.
The first sign of the Return?
The Relative Strength Index is often used to identify current conditions in the market and indicate reversal points when the price reaches oversold or overbought values.
The indicator is also used to find divergences relative to the price chart and then determine if the trend on the asset has reversed.
But while divergences can be considered an additional way to use the indicator, looking for Oversold and overbought levels is the main way to use the Relative Strength Index.
While the RSI can give us a clue about the upcoming move in the future, it is not a panacea against a bearish trend as its signals are generally considered short-term. Almost every reversal signal based on the RSI remains active until the values of the indicator enter the “neutral” zone.
During the last drop below 25 on the indicator in March 2020, Bitcoin almost instantly reversed and hit a local high of $10,000. But while the indicator “predicted” a short-term reversal, the data it provided did not suggest that the cryptocurrency would reach new ATH in the next few months.
All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.