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Chart – RSI

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The RSI is an oscillator that follows the movement of prices; it moves within a range of 0 to 100.

One method of RSI analysis is to look for a divergence between the prices of the financial instrument analyzed and the oscillator itself. This divergence is a good indication of a probable imminent reversal. Another use is to analyze the highs and lows as the RSI usually reaches highs above 70 and lows below 30 and does so before the graph of the underlying price.

In practice, the Overbought and Oversold areas are established, and once they are reached, the trend of the title in question is reversed.