RSI compresses recent up-closes vs down-closes into a 0–100 line — an odometer of momentum, not a magic oscillator. The most abused idea in retail trading is 'overbought = sell': in a real trend RSI can sit above 70 for HOURS while price doubles the move. Overbought means strong, not finished.
The read that actually works: divergence
- Bearish divergence: price makes a higher high, RSI makes a LOWER high — each new push carries less force. The trend is aging.
- Divergence is a WARNING, not an entry. It tells you to tighten risk, take partials, and watch for a trigger (a reversal candle, a level failure).
- Multiple divergences stack: the third higher-high with fading momentum at a major level is a genuine reversal setup. The first one alone gets steamrolled constantly.
Momentum tools measure the PAST with style. They earn their place as filters and warnings — never as standalone entries against a working trend.