One of the most powerful applications of RSI is detecting . A bearish divergence occurs when price makes a higher high but RSI makes a lower high — suggesting upward momentum is weakening despite new price highs. A bullish divergence occurs when price makes a lower low but RSI makes a higher low — suggesting downward momentum is weakening despite new price lows. Divergences often precede significant trend reversals.
Strengths
A small real body (the colored portion of the candle) near the top of the candle with a long lower wick. Hammers appear after a downtrend and signal potential bullish reversal. The long lower wick indicates that sellers pushed prices lower during the period, but buyers stepped in aggressively and drove prices back up to close near the high.
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Signals a change from an uptrend to a downtrend.
The price tests a support or resistance level twice, fails to break through, and reverses sharply. This highlights a clear exhaustion of the prevailing trend. Continuation Patterns (Trend Pausing)
Trend tells you where to go. Momentum tells you when . One of the most powerful applications of RSI is detecting
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Trading in harmony with the dominant market direction drastically increases your statistical probability of success. You must learn to read the structural framework of price delivery. Structural Definitions Divergences often precede significant trend reversals
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4. Essential Chart Patterns for Trend Reversals and Continuations