By Steven Hicks — 21 Aug 2026

RSI: When a Market Moves Too Far, Too Fast

Markets can become enthusiastic.

Sometimes extremely enthusiastic.

A commodity begins rising, attracts additional attention, rises again, and suddenly everyone seems to be talking about it. The opposite can happen just as quickly: prices fall, selling accelerates, and pessimism spreads.

Eventually an analyst may wonder:

Has this market moved too far, too fast?

One of the most widely used technical indicators for examining that question is the Relative Strength Index, better known as RSI.

Despite its name, RSI doesn’t compare the strength of one commodity with another.

Instead, it measures the strength of a market’s recent upward price movements relative to its recent downward price movements.

And it can teach us an important lesson:

A strong market can become overextended without necessarily becoming bearish.

Technical Indicator of the Day: Relative Strength Index (RSI)

RSI was developed by technical analyst J. Welles Wilder Jr. and introduced in his 1978 book New Concepts in Technical Trading Systems.

The indicator oscillates between:

0 and 100

A commonly used RSI calculation examines the previous 14 periods, although analysts can select other periods.

The mathematics compare average gains with average losses over that period and convert the relationship into the 0–100 scale.

Fortunately, modern charting software performs the calculation automatically.

What’s more important is understanding what the number is trying to tell us.

The Famous 70 and 30 Levels

Two RSI levels receive enormous attention:

Above 70 — commonly described as overbought

Below 30 — commonly described as oversold

These terms are useful—but they are also frequently misunderstood.

“Overbought” does not mean:

The market must fall.

And “oversold” does not mean:

The market must rise.

That’s worth repeating.

An overbought market can become more overbought.

An oversold market can become more oversold.

In a powerful trend, RSI can remain at an extreme level much longer than someone expecting an immediate reversal might anticipate.

What Does “Overbought” Really Mean?

Suppose crude oil begins advancing rapidly.

Over several sessions, the magnitude and frequency of gains substantially exceed the magnitude and frequency of losses.

RSI rises:

55…

63…

71…

76…

The market is displaying unusually strong recent upward momentum.

Calling RSI 76 “overbought” doesn’t mean buyers have somehow been mathematically exhausted.

It means the recent balance of price movement has become unusually concentrated toward the upside.

That can be valuable information.

But what happens next still has to be determined by the market.

The Same Problem Occurs With “Oversold”

Imagine wheat falls sharply after an unexpected development.

RSI drops below 30.

Someone unfamiliar with the indicator might think:

“RSI says oversold, so this must be the bottom.”

Not necessarily.

If selling pressure continues, RSI could fall to:

25…

20…

or even lower.

An extreme RSI reading tells us something about the intensity of recent movement.

It doesn’t identify a guaranteed turning point.

That’s why experienced analysts often wait for additional evidence.

Momentum Before Reversal

Think about a car traveling down a highway.

If the speedometer reads 80 mph, it tells you the car is moving quickly.

It doesn’t tell you that the car is about to make a U-turn.

RSI works somewhat similarly.

A high RSI reading tells us that recent upward momentum has been strong.

For a reversal, we need evidence that something has actually changed.

That might include:

failure at resistance,
a break of short-term support,
weakening volume,
a change in market structure,
a reversal price pattern, or
deterioration in momentum itself.

The RSI reading is one piece of the puzzle.

RSI and Trends

RSI becomes especially interesting when viewed in the context of a broader trend.

During strong uptrends, RSI may repeatedly reach 70 or higher.

Instead of immediately reversing, the market may consolidate briefly and then continue upward.

Likewise, during strong downtrends, RSI may repeatedly reach oversold territory.

This teaches us something important:

Momentum indicators should be interpreted differently depending on the surrounding market environment.

An RSI reading of 72 during a powerful breakout isn’t necessarily equivalent to an RSI reading of 72 when price is approaching major resistance inside a long-established trading range.

Same indicator.

Same number.

Different context.

RSI Divergence

One of the more interesting ways analysts use RSI is to look for divergence.

Divergence occurs when price and the indicator stop telling exactly the same story.

Suppose gold reaches a new high.

Later, gold reaches an even higher high.

But RSI does something different.

On the first price high, RSI reaches 78.

On the second, higher price high, RSI reaches only 69.

Price has become stronger.

Momentum has become weaker.

That’s called bearish divergence.

The reverse can happen near declining markets.

Suppose copper makes a new low, but RSI forms a higher low.

That is commonly called bullish divergence.

Again, neither divergence guarantees a reversal.

It simply tells us:

Something underneath the price movement may be changing.

That’s worth investigating.

RSI Failure Swings

Wilder also described another RSI behavior sometimes called a failure swing.

For example, RSI might:

rise above 70,
retreat,
attempt another advance,
fail to reach its previous RSI high, and
subsequently break below its prior RSI low.

That sequence demonstrates a measurable deterioration in momentum.

It can be more informative than simply seeing RSI cross below 70.

Why?

Because we’re examining structure within the indicator itself, rather than reacting to a single numerical threshold.

RSI Can Help Identify Ranges

RSI isn’t useful only at 70 and 30.

Analysts may also watch the midpoint:

RSI above 50 generally indicates that recent gains have outweighed recent losses.

Below 50 suggests the opposite.

During sustained uptrends, RSI may spend considerable time in the upper portion of its range.

During sustained downtrends, it may spend more time in the lower portion.

This can provide another way to evaluate whether momentum agrees with the broader price trend.

Don’t Change the Rules to Fit the Chart

Modern charting software makes it easy to change RSI settings.

14 periods.

10 periods.

7 periods.

21 periods.

Different overbought levels.

Different oversold levels.

There’s nothing inherently wrong with experimenting.

But there is a danger.

If an analyst continually changes settings until an indicator perfectly explains what already happened, the analysis can become curve fitting.

The indicator begins describing history beautifully while providing little useful discipline going forward.

A better approach is to understand what a particular setting measures and use it consistently enough to learn its strengths and weaknesses.

RSI + Support and Resistance

Now let’s combine several lessons from our Training Academy.

Suppose a commodity approaches major resistance.

At the same time:

RSI is above 70,
RSI begins forming bearish divergence,
volume declines during the latest advance, and
price fails several times to close above resistance.

None of those observations alone proves a reversal is coming.

But together, they create an interesting analytical picture.

Compare that with:

RSI above 70,
price breaking decisively through resistance,
expanding volume,
higher highs and higher lows, and
strong momentum across multiple time frames.

Same RSI reading.

Very different market evidence.

That’s precisely why MarketsTriad emphasizes confluence—several independent observations pointing toward the same interpretation.

The Indicator Is Not the Decision

Perhaps the biggest mistake with RSI is turning it into a mechanical command:

RSI > 70 = Sell

RSI < 30 = Buy

That strips away nearly everything useful about the indicator.

RSI isn’t issuing orders.

It’s measuring momentum.

Our job as analysts is to interpret that measurement within the larger market structure.

MarketsTriad Takeaway

RSI helps answer a valuable question:

How strong has recent price momentum become?

It can identify unusually powerful movement.

It can expose divergence.

It can help compare momentum with price structure.

But it cannot tell us with certainty when a trend will end.

So when you see RSI above 70, don’t automatically think:

“Sell.”

And when you see RSI below 30, don’t automatically think:

“Buy.”

Instead ask:

“Why is momentum this extreme—and what is price doing while it happens?”

That question transforms RSI from a simplistic overbought/oversold signal into something much more valuable:

A tool for understanding the internal strength of a market move.

MarketsTriad provides market information and educational analysis. This material is for educational and informational purposes only and is not individualized investment, trading, legal, or financial advice. Futures and commodities involve substantial risk, and past market behavior does not guarantee future results.