Price Action: How to read overbought and oversold w/ & without indicat...

 



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Indicators:
EMA 3 (blue)
EMA 20 (yellow)
EMA 50 (orange)
EMA 100 (red)
EMA 200 (purple)

Bollinger Band Period 20 Deviation 2 (green)
Bollinger Band Period 20 Deviation 1 (white)

Overbought means an extended price move to the upside; oversold to the downside. When price reaches these extreme levels, a reversal is possible. The Relative Strength Index (RSI) can be used to confirm a reversal. DEFINITION of 'Overbought' Overbought refers to a situation in which the demand for a certain asset or security unjustifiably pushes the price of that asset or underlying asset to levels that are not justified by fundamentals.

Two of the most common indicators of overbought or oversold conditions are the relative strength index (RSI) and the stochastic indicators. RSI levels of 80 or above are considered overbought, as this indicates an especially long run of successively higher prices. An RSI level of 30 or below is considered oversold. Developed by J. Welles Wilder, the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30.

The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30. Overbought means an extended price move to the upside; oversold to the downside. When price reaches these extreme levels, a reversal is possible. The Relative Strength Index (RSI) can be used to confirm a reversal.

Oversold is a condition in which the price of an underlying asset has fallen sharply to a level below where its true value resides. This condition is usually a result of market overreaction or panic selling and is generally considered short term in nature. Bound momentum indicators are best suited for overbought/oversold analysis. Basically, there are two types of momentum oscillators: bound and unbound. Bound oscillators, such as RSI and the Stochastic Oscillator, fluctuate within a specific range, zero to one hundred in this case. he market price always reflects the real value of a stock. It is desirable to buy stocks when they are oversold. When a stock is overbought owners who are not emotionally attached to the stock should sell it. They believe they are getting paid more for the stock than it is worth.

The relative strength index (RSI) is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The indicator should not be confused with relative strength.