ADANIPORTS - Bullish Reversal Setup | RSI DivergenceHello traders, let's break down the current market structure for Adani Ports & Special Economic Zone Ltd (ADANIPORTS) on the 125-minute timeframe.
After a sharp corrective decline toward the 1,640 level, the stock is showing clear structural signs of a bullish reversal. Price action has begun consolidating, and buying interest is re-emerging at the lows.
Key Technical Observations :
Bullish RSI Divergence: While price printed lower lows toward the 1,640.4 mark, the 14-period RSI formed clear higher lows, signaling a momentum shift from sellers to buyers.
Volume Contraction on Second Leg Down: Notably, during the second leg of the downward move, there was a clear fall in volume. This drop in volume indicates that selling pressure is drying up and sellers are losing strength, heavily supporting our reversal thesis.
Base Formation & Supply Absorption: Price is attempting to form a bottom and is currently pushing toward the local supply/consolidation ceiling marked by the horizontal dotted lines.
Breakout Trigger: The horizontal dotted lines around 1,715–1,720 mark the key structural pivot. A decisive breakout above this zone will confirm the trend reversal and shift the short-term structure to bullish.
Trade Setup (Long):
Entry: Initiate a long position only on a sustained candle close above the marked dotted line (~1,720).
Stop Loss (SL) : Place a strict SL below the base support / recent swing low at 1,640.
Target 1: 1,800 (Intermediate swing resistance).
Target 2: 1,890 (Retest of previous major highs).
Trade Psychology & Risk Management:
Key Takeaway: Patience is the foundation of high-probability trading. Do not front-run the setup while the price is still consolidating under resistance. Wait for price to convincingly clear the marked dotted line at 1,720 with healthy volume to ensure buyers have taken full command. Always adhere strictly to your predefined stop loss to manage downside risk.
What is your outlook on ADANIPORTS? Are you anticipating a strong bounce towards the previous highs, or do you expect further consolidation? Let’s discuss in the comments!
Disclaimer: This analysis is strictly for educational purposes and does not constitute financial advice. Always perform your own research and manage risk responsibly. 
Long
Gold: I’m Looking Only for a Sell SetupGold continues to move higher, but at this point I am no longer interested in buying it. I am looking only for a sell setup.
The main reason is the bearish signal from **RSI Smart Divergence**.
With my current settings, the indicator is selective: it looks for divergence between confirmed RSI pivots, and in this mode both divergence points must be formed completely outside the normal RSI range.
On the current 2-hour chart, a strong bearish divergence has formed in the overbought area. Price continued to make higher highs, while RSI failed to confirm those highs.
For me, this does not mean that price must reverse immediately. It means that buying at this stage has become considerably less attractive and that I prefer to wait for confirmation for a short.
There is also an important change in the behavior of price around the Magic Diagonals .
For several days, gold was taking small pockets of liquidity near the lower boundary of the daily channel and then returning toward the upper weekly area.
Today, that behavior changed.
Price was unable to retest either the upper weekly boundary or the upper daily boundary. The move stopped around the middle line of the daily structure, and price is now attempting to move outside the daily channel.
The level I am watching is approximately **4,390**, around the purple daily line on the chart.
My preferred setup would be:
1. Price establishes itself below the daily channel.
2. The area around 4,390 is retested from below.
3. The retest fails.
4. Price continues lower into a larger correction.
The first downside areas I am watching are marked on the chart.
If the correction develops further, I believe gold may eventually revisit — and possibly take — the lows formed last month.
Only after a deeper correction of that kind would I start looking again for the possibility of another strong bullish move.
The previous 2-hour extreme divergence detected by RSI Smart Divergence is marked with the green arrows on the left side of the chart.
That signal did not produce an immediate reversal either. Price spent time consolidating after the divergence before eventually making the substantial move that brought gold into the current area.
The current setup may develop in a similar way: the divergence gives me the directional warning, while the Magic Diagonals structure gives me the levels where I want to see confirmation.
For now, my plan is simple:
No longs. I am waiting for a confirmed sell setup below the daily channel.
Short
ETH/USD Long: Price Reclaims Support After RSI DivergenceMy read, straight up: ETH bottomed, printed a bullish RSI divergence, and took back the level that used to stop every rally. I'm long. Entry near $1,850, stop under $1,516, target $2,386.
What I see
ETH sold off hard and made its low near $1,516. But look at the RSI: while price made a lower low, momentum made a higher low. That gap is a bullish divergence — sellers were running out of power even as price kept dropping. Since then, ETH pushed back above $1,850 and is now holding around $1,915. The level that was a ceiling is now a floor.
Why it matters
This is simple. When a key level flips from resistance to support, and momentum is already turning up under it, the odds favor the buyers. I'm not guessing a bottom — the chart already showed me the turn. My job now is to trade with it, not against it.
The plan
Direction: Long
Entry: ~$1,850 on a pullback (best), or here around $1,915
Stop loss: $1,516
Target: $2,386
Risk / Reward: about 1.6 to 1 from $1,850
Where I'm wrong
If ETH closes back below $1,516, the trade is dead. The low failed, the divergence failed, I'm out. If price loses $1,850 and can't climb back over it within a day or two, I step aside and wait. No ego. The stop is the stop.
What I'm watching
Hold above $1,915 → the road opens to $2,000, then $2,200, then $2,386.
RSI staying above its signal line (around 56) keeps the momentum on my side.
Rising volume on any push through $2,000 tells me it's real, not just a bounce.
That's the whole idea. Clear level, clear trigger, clear invalidation. Trade your own plan and your own size.
This is my chart read, not financial advice.
#ETH #Ethereum #ETHUSD #Crypto #RSIDivergence #TechnicalAnalysis #CryptoTrading #Altcoins 
Long
Long 
Trading Roadmap | Classical TA · Lesson 11 — Core IndicatorsLesson 11 - Core Indicators (RSI, MACD, Stochastic, Bollinger Bands)
Difficulty: Intermediate
The indicators on your chart are built from the same price data you already see. The four covered here are among the most widely followed in technical analysis — knowing how to read them can add useful context to your setups.
🔵 WHAT INDICATORS ACTUALLY DO
An indicator does not see the future — it reorganizes past price (and sometimes volume) into a different visual form. That can make certain conditions easier to spot: fading momentum, stretched moves, or quiet periods before expansion.
Two useful categories to keep in mind:
- Oscillators (RSI, Stochastic) — move between fixed bounds; often more useful in ranging markets
- Trend/momentum tools (MACD, Bollinger Bands) — follow price openly; often more useful for reading trend strength and volatility
No indicator needs to be traded on its own. Most experienced traders use them as context on top of the structure you learned in earlier lessons.
🔵 RSI — RELATIVE STRENGTH INDEX
RSI measures the speed of recent price changes on a 0–100 scale.
- Above 70 → often described as overbought (momentum stretched to the upside)
- Below 30 → often described as oversold (momentum stretched to the downside)
Important nuance: in a strong trend, RSI can stay overbought or oversold for a long time. A high reading alone is not a sell signal.
One of the more widely watched RSI signals is divergence — price makes a new high while RSI makes a lower high (or the reverse at lows). This can suggest momentum is fading, especially when confirmed by a reversal pattern from Lesson 7.
🔵 MACD — MOVING AVERAGE CONVERGENCE DIVERGENCE
MACD builds directly on the moving averages from Lesson 10. It shows the relationship between a faster and a slower average of price, plus a signal line and a histogram.
Common ways traders read it:
- MACD line crossing the signal line — can indicate a shift in short-term momentum
- Histogram shrinking — the current push may be losing strength
- MACD crossing the zero line — often read as a broader momentum shift
Because MACD is built from moving averages, it lags by design. It tends to work better for confirming momentum than for picking exact tops and bottoms.
🔵 STOCHASTIC OSCILLATOR
The Stochastic compares the latest close to the recent high–low range: readings near 100 mean price is closing near the top of its recent range, near 0 means the bottom.
- Above 80 / below 20 → commonly used overbought/oversold zones
- %K crossing %D inside those zones → a frequently watched trigger
Stochastic tends to shine in sideways markets, where price rotates between support and resistance (Lesson 3). In strong trends it can stay pinned at extremes, so many traders only take its signals in the direction of the larger trend.
🔵 BOLLINGER BANDS
Bollinger Bands wrap a moving average with an upper and lower band that expand and contract with volatility.
- Wide bands → volatile conditions
- Narrow bands (the "squeeze") → quiet conditions that often precede expansion — direction unknown until price shows its hand
- Band walk → in strong trends, price can ride along one band for extended periods; touching a band is not by itself a reversal signal
A squeeze followed by a decisive close outside the bands, supported by volume (Lesson 9), is one of the more commonly watched volatility setups.
In the chart above: notice how the bands tightened in late December while price moved sideways — quiet conditions. The expansion arrived in late January with a strong break to the downside. The squeeze suggested a bigger move may be building, but the direction only became clear once the break happened.
🔵 COMBINING THEM WITHOUT CLUTTER
More indicators does not mean more clarity. A practical approach:
- Pick at most one oscillator and one trend/volatility tool
- Let structure lead: levels, trend, and volume first — indicators as confirmation
- Avoid stacking indicators that measure the same thing (RSI + Stochastic together mostly repeat each other)
🔵 COMMON MISTAKES
- Selling just because RSI is above 70 in a strong uptrend
- Taking every MACD crossover in a ranging market, where whipsaws are frequent
- Treating a Bollinger Band touch as an automatic reversal signal
- Loading five indicators and losing sight of price itself
🐳 PRO TIPS
- Divergence signals often carry more weight on higher timeframes — a 4H or daily divergence tends to matter more than a 5-minute one.
- When an oscillator signal appears at a level you already marked (Lesson 3) inside a clear trend (Lesson 2), the context is doing most of the work — the indicator is just the trigger.
- Try removing all indicators for a week and trading structure only, then add one back. Many traders find this reveals which tool actually helps them.
- Default settings (RSI 14, MACD 12/26/9, Stochastic 14/3/3, BB 20/2) are a starting point — consistency matters more than optimization.
If this lesson helped you, drop a comment with the indicator you rely on most — and let us know which topic you want covered next. 🐳
Full Trading Roadmap | Classical TA Course
Trading Roadmap | Classical TA · Lesson 01 — Mastering the Chart
Trading Roadmap | Classical TA · Lesson 02 — Mastering Trends
Trading Roadmap | Classical TA · Lesson 03 — Support & Resistance
Trading Roadmap | Classical TA · Lesson 04 — Price Channels
Trading Roadmap | Classical TA · Lesson 05 — Single Candle Patterns
Trading Roadmap | Classical TA · Lesson 06 — Multi-Candle Patterns
Trading Roadmap | Classical TA · Lesson 07 — Reversal Chart Patterns
Trading Roadmap | Classical TA · Lesson 08 — Continuation Chart Patterns
Trading Roadmap | Classical TA · Lesson 09 — Volume Analysis
Trading Roadmap | Classical TA · Lesson 10 — Moving Averages
Best Regards, BigBeluga 🐳 WKLY MKT OUTLOOK – 4 WEEKS OF COMPRESSION, BRKOUT GETTING CLOSERLAST WEEK'S REPORT CARD
✅ Projected Nifty Range: 24,700 – 23,600
✅ Actual Weekly Range: 24,530 – 23,805
✅ *Range respected for the 5th consecutive week
✅ Bonus Level Worked: Hourly close below 24,089 triggered weakness exactly as discussed.
✅ Market remained in the expected consolidation phase.
NIFTY 50
Nifty closed at 24,206(-64 points).
For the 5th consecutive week, Nifty respected the projected range, reinforcing the importance of following higher-timeframe structure rather than reacting to daily news.
More importantly, this is now the 4th consecutive weekly close above the psychological level of 24,000, suggesting buyers continue to defend this zone.
However, after four weeks of consolidation between 23,800–24,500, both bulls and bears are running out of patience.
The longer the compression, the stronger the eventual breakout is likely to be.
Bull Trigger: Strong weekly close above 24,400 → 24,800 / 25,000
Bear Trigger: Hourly close below 24,164 → 23,850 / 23,800
Expected Range:24,700 – 23,750
BANK NIFTY
Closed at 58,045 (+100 points).
Bank Nifty also remains in consolidation and formed a Doji candle, reflecting indecision.
Strong weekly close above 58,900 can restart the journey towards All-Time Highs.
Expected Range:59,100 – 56,850
S&P 500
Closed at 7,575 (+100 points).
👉 Sustain above 7,600 → 7,697 / 7,812 / 7,885
Weekly RSI divergence is still visible. Failure to sustain above resistance may drag the index towards 7,393 / 7,292.
BONUS LEVEL OF THE WEEK
👉 Hourly close below 24,164 may quickly push Nifty towards 23,850–23,800.
FINAL VIEW
• Nifty continues to consolidate.
• Bank Nifty remains the key index to watch.
• S&P500 is at an important decision zone.
The market is compressing, and history tells us that the longer the consolidation, the stronger the breakout.**
rade the levels. Manage risk. Let price confirm the trend. 
Long
BTC — First Weekly 200 MA Test. High-Confluence Long ZoneBTC — First Weekly 200 MA Test of the Cycle. High-Confluence Long Zone.
Bias: Long / Accumulation | Timeframe: Weekly | Asset: BTC (ETH correlated)
Bitcoin is down over 50% from the October 2025 all-time high and now sits in the single most technically significant zone of this entire cycle. I've taken an aggressive entry here. This is a high-confluence area — not a guarantee — and I'm treating it with defined risk.
Why This Zone Matters
1. First Weekly 200 MA test since the bull market breakout. This is the headline. Price has not tested the Weekly 200 MA since breaking out — first touches of this MA after a multi-year breakout are historically where major reversals begin.
2. Testing 50% of the prior all-time-high consolidation — a major High Volume Node. This is a heavy liquidity zone that can act as a support/resistance flip. Significant prior trading activity here means real buyers are likely to defend it.
3. Monthly 50 MA test (potential — may be front-run). Adds confluence on the higher timeframe.
4. Early Weekly RSI bullish divergence — forming, not confirmed. Being honest: this is developing, not complete. I want to see it confirm.
5. Crowded shorts + negative funding = squeeze fuel. This is the part most people miss. Open interest is near record highs with persistently negative funding rates. Short positioning is historically crowded — and crowded trades rarely resolve quietly. This is the strongest near-term tailwind for a bounce.
The Other Side — Why I Could Be Wrong
I'm not pretending this is a clean buy. The backdrop is genuinely heavy:
Worst monthly ETF outflows of 2026 — institutions are de-risking faster than price alone suggests.
Mt. Gox distributions + corporate selling adding supply pressure.
Whales distributing while retail accumulates — historically a bearish combination.
Fed rate decision on June 17 is a binary catalyst. A dovish surprise fuels a sharp recovery; a hawkish one puts the lower targets in play. My entry sits right on the level that a hawkish outcome targets — eyes open on that.
In 2017–2018, BTC eventually broke through the 200 MA before bottoming. That can happen again. If this zone fails, the next accumulation levels I'm watching are 60K, 54K, 48K — and for the deep-bear scenario, 32K.
My Trade
Entry: 61,600 (aggressive)
Stop Loss: 58,400
Expectation: A relief move of 10–25% after a sell-off of this size
Risk: ~5.2%
How I'm Managing It
This is a defined-risk bounce trade in a confluence zone, not a bottom call. If the zone holds and shorts get squeezed, the move can be sharp. If it breaks, I'm out at my stop and reloading lower.
Not financial advice. Do your own research. Manage your risk — never all in, never size beyond what a loss would let you sleep through.
Long
Long
Short
Short
Short 
US Dollar tests 100 breakout as divergence warns of DXY pullbackThe US Dollar Index is on track for its strongest monthly gain since July 2025, rising nearly 3% in March as safe-haven demand surged during the Middle East conflict. But despite that strength, DXY appears to be struggling to establish itself above the key 100 psychological level, with traders watching whether the breakout can hold until Wednesday’s close.
Geopolitical headlines remain the main macro driver. President Donald Trump said the US is in serious talks aimed at ending the conflict with Iran, but he also renewed threats against Iran’s energy infrastructure, while thousands of US Army paratroopers have arrived in the region as the military buildup intensifies. That keeps the broader dollar narrative supportive, but technically, fading momentum could be an early signal of locking in profits.
Key topics covered
- March safe-haven rally : DXY is closing Q1 with a powerful monthly gain after January weakened and February was mixed (inside bar), confirming the dollar's role as one of the market’s preferred havens during geopolitical stress.
- The 100 breakout test : The key question now is whether the index can deliver another daily close above 100 and confirm that this is a genuine breakout rather than a temporary push above resistance.
- RSI divergence warning : On the daily chart, price has pushed higher while momentum has not kept pace, creating a clear bearish divergence. That does not imply a macro reversal, but it does increase the probability of a technical correction from current levels.
- Broadening pattern resistance : The chart still resembles a broadening formation, and current price action is approaching a major resistance cluster between the 38.2% and 61.80% extension zone, roughly 100.90 to 101.10.
DXY scenarios & trade plan:
- Bearish technical correction : This is the short-term setup. As long as DXY trades into the 100.70 to 100.90 area, and especially if it stretches toward 101.00 to 101.10, that zone can be treated as resistance for a tactical short trade rather than a macro bearish call. A stop can sit just above 101.10/101.20, with downside targets at 100.00 first, then the 99.70 area, followed by 98.90 and potentially 98.50 if profit-taking accelerates.
- Bullish continuation : If the index breaks cleanly above 100.90 and then 101.10, the bearish divergence starts to weaken and the breakout gains more credibility. In that case, the move higher is no longer a false break above the November high, and the door opens to a broader continuation instead of the pullback scenario.
So the bias here is downside for a technical correction, not because the dollar's macro safe-haven story is broken, but because the chart is stretched into resistance while momentum is fading. The plan is simple: watch the 100.70–101.10 resistance zone, respect 100 as the first profit area on shorts, and stay flexible if headlines on Iran suddenly shift sentiment again.
Are you fading the breakout above 100 or waiting for confirmation above 101 first?
This content is not directed to residents of the EU or UK. Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice.
ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information. 
Short
XAUUSD Long Setup | Demand Zone + RSI Bullish DivergenceGold is sitting right at a key demand zone around 5,000-5,040 on the 1H chart. Price has tested this level multiple times and buyers are stepping in consistently.
What makes this zone interesting is the clear RSI bullish divergence. Price printed lower lows while RSI is forming higher lows, signaling that selling momentum is fading even though price keeps dipping. This is a textbook exhaustion signal.
On the fundamental side, the macro backdrop continues to support gold. Uncertainty around trade policy, sticky inflation expectations, and central bank demand all keep the bullish case intact. The recent pullback from 5,400 looks corrective rather than structural.
The play:
Entry: Current demand zone (5,000-5,040)
First target: 5,200 (previous structure resistance)
Invalidation: Clean break and close below 4,960
The path to 5,200 is relatively clean with no major supply clusters in between. Once momentum flips, an impulsive move toward that level is very realistic.
Risk management is key. Size your position accordingly. Long 
Long 
AUD/USD breaks twds Fibo cluster ahead of NFP, CPIAUD/USD is the key pair to watch right now ahead of critical US data releases, with Non-Farm Payrolls today and CPI on Friday. The pair has rallied significantly off the 0.69 bottom recently, sitting between two powerful forces.
On one side, the US dollar has weakened following softer-than-expected retail sales and reports of China urging banks to curb exposure to US Treasuries. On the other, the Australian dollar has been buoyed by the RBA’s unique hawkish stance.
From a technical perspective, the break above 0.7000 brings a critical "Magnet Zone" at 0.7216 into focus—a level where multiple Fibonacci projections converge. A clear break here could signal a medium-term structural shift towards 0.7300.
Key topics covered
USD weakness : How missed retail sales and China’s directive on US Treasuries have pressured the greenback, fuelling the move away from the 0.6940 support.
RBA hawkishness : Why the RBA remains the only major bank outside Japan maintaining a tightening cycle, with markets pricing a 70% chance of another hike in May following Deputy Governor Hauser’s comments.
The Magnet Zone : Why the 0.7216 level is a critical target, representing both the 61.8% Fibonacci retracement and the 100% extension of two different legs.
Elliott Wave structure : Identifying the current move as a potential 3rd wave impulse, but why RSI divergence suggests a correction (Wave 4) may be likely after hitting the magnet zone.
AUD/USD scenarios
Bullish : A sustained push through the 0.7216 magnet zone signals strong momentum, targeting the 0.7300 analyst forecast and potentially the 0.8000 structural high in the medium-long term.
Bearish : RSI divergence triggers a rejection at the 0.7216 cluster, leading to a Wave 4 correction back towards the 0.7000 handle before any further upside.
Are you buying the dip or fading the rally at the magnet zone? Share your thoughts in the comments.
This content is not directed at residents of the EU or UK. Any opinions, news, research, analysis, prices or other information provided are for general market commentary only and do not constitute investment advice. ThinkMarkets accepts no liability for any loss or damage, including loss of profit, arising directly or indirectly from reliance on this information. RSI Divergence – Momentum Weakening Framework📉 RSI Divergence – Momentum Weakening Framework
This chart illustrates how RSI divergence helps identify weakening momentum during a down move, even when price continues to fall.
RSI divergence is not a buy or sell signal by itself. Instead, it highlights a loss of momentum, often appearing before price stabilizes or reacts.
This framework focuses on:
The relationship between price action and momentum
Identifying exhaustion during sustained moves
Avoiding emotional entries during strong trends
RSI divergence reveals what is changing under the surface, not what price must do next.
📊 Key Observations
1️⃣ Price Action (Lower Low Formation)
In the price chart:
Price continues to make a lower low (LL)
Visually, the trend still appears bearish
At this stage, most traders assume downside continuation.
2️⃣ RSI Behavior (Higher Low Formation)
On the RSI indicator:
RSI fails to make a lower low
RSI instead forms a higher low (HL)
This creates a clear mismatch between price and momentum.
3️⃣ What RSI Divergence Means
RSI divergence occurs when:
Price and RSI move in opposite directions
Price shows strength in the trend, but momentum does not
Important clarification:
RSI divergence does not predict a reversal.
It signals that selling pressure is weakening, even if price is still falling.
4️⃣ Why This Matters
In trending markets:
Price can continue falling even as momentum fades
Strong trends slow down before they reverse or consolidate
RSI divergence often appears during:
Trend exhaustion
Pullback completion
Volatility compression before a reaction
Momentum usually changes before price structure does.
5️⃣ How RSI Divergence Is Used Effectively
RSI divergence works best when:
Used as a context tool, not a trigger
Combined with price structure or support zones
Followed by visible price stabilization or reaction
RSI tells you pressure is changing, not where to enter blindly.
6️⃣ What Invalidates the Idea?
The divergence loses relevance if:
Price continues making strong impulsive lower lows
RSI starts breaking down and follows price lower
No pause or reaction appears in price
Divergence without price response is information, not confirmation.
📊 Chart Explanation
Symbol: FX:EURUSD
Timeframe: 2H
This chart highlights:
Price forming a clear lower low
RSI forming a higher low
A bullish RSI divergence structure
Early signs of momentum exhaustion
Expected Market Behavior:
Strong trend → Momentum slows → Divergence forms → Price stabilizes or reacts
RSI divergence explains why momentum is weakening, not when to enter.
📘 How to Use RSI Divergence Correctly
Best Practices
Use RSI divergence as a warning signal
Always wait for price confirmation
Combine with structure, zones, or trend context
Common Mistake
Buying immediately after spotting divergence
Correct Approach
Let price show that sellers are losing control
⚠️ Disclaimer
For educational purposes only
Not financial advice
Markets involve risk 
Education
Long
Short 
RSI Indicator LIES! Untold Truth About Relative Strength Index
The Relative Strength Index (RSI ) is a classic technical indicator that is applied to identify the overbought and oversold states of the market.
While the RSI looks simple to use, there is one important element in it that many traders forget about: it's a lagging indicator . This means it reacts to past price movements rather than predicting future ones. This inherent lag can sometimes mislead traders, particularly when the markets are volatile or trade in a strong bullish/bearish trend.
In this article, we will discuss the situations when RSI indicator will lies to you. We will go through the instances when the indicator should not be relied and not used on, and I will explain to you the best strategy to apply RSI.
Relative Strength Index analyzes the price movements over a specific time period and displays a score between 0 and 100.
Generally, an RSI above 70 suggests an overbought condition, while an RSI below 30 suggests an oversold condition.
By itself, the overbought and overbought conditions give poor signals , simply because the market may remain in these conditions for a substantial period of time.
Take a look at a price action on GBPCHF. After the indicator showed the oversold condition, the pair dropped 150 pips lower before the reversal initiated.
So as an extra confirmation, traders prefer to look for RSI divergence - the situation when the price action and indicator move in the opposite direction.
Above is the example of RSI divergence:
Crude Oil formed a sequence of higher highs, while the indicator formed a higher high with a consequent lower high. That confirmed the overbought state of the market, and a bearish reversal followed.
However, only few knows that even a divergence will provide accurate signals only in some particular instances.
When you identified RSI divergence, make sure that it happened after a test of an important key level.
Historical structures increase the probability that the RSI divergence will accurately indicate the reversal.
Above is the example how RSI divergence gave a false signal on USDCAD.
However, the divergence that followed after a test of a key level, gave a strong bearish signal.
There are much better situations when RSI can be applied, but we will discuss later on, for now, the main conclusion is that
RSI Divergence beyond key levels most of the time will provide low accuracy signals.
But there is one particular case, when RSI divergence will give the worst , the most terrible signal.
In very rare situations, the market may trade in a strong bullish trend, in the uncharted territory, where there are no historical price levels.
In such cases, RSI bullish divergence will constantly lie , making retail traders short constantly and lose their money.
Here is what happens with Gold on a daily.
The market is trading in the uncharted territory, updated the All-Time Highs daily.
Even though there is a clear overbought state and a divergence,
the market keeps growing.
Only few knows, however, that even though RSI is considered to be a reversal, counter trend indicator, it can be applied for trend following trading.
On a daily time frame, after the price sets a new high, wait for a pullback to a key horizontal support.
Your bullish signal , will be a bearish divergence on an hourly time frame.
Here is how the price retested a support based on a previous ATH on Gold. After it approached a broken structure, we see a confirmed bearish divergence.
That gives a perfect trend-following signal to buy the market.
A strong bullish rally followed then.
RSI indicator is a very powerful tool, that many traders apply incorrectly.
When the market is trading in a strong trend, this indicator can be perfectly applied for following the trend, not going against that.
I hope that the cases that I described will help you not lose money, trading with Relative Strength Index.
❤️Please, support my work with like, thank you!❤️
I am part of Trade Nation's Influencer program and receive a monthly fee for using their TradingView charts in my analysis.
Education 
Long
