Video narration
Does overbought mean a stock must fall? A speedometer shows recent speed, not what's next. RSI compares average gains with average losses over a chosen period, often 14. Its score runs from zero to 100: 100 minus 100 divided by one plus RS; RS is average gain divided by average loss. Usually, above 70 is overbought; below 30, oversold. They're warning zones, not commands, and strong trends can keep RSI there. That's the shift: RSI measures momentum, not whether a stock is too expensive or due to reverse. To spot divergence, match price and RSI swing highs or lows. Higher price highs with lower RSI highs suggest weakening upward momentum: bearish divergence. Measure the RSI-point gap; there's no universal cutoff. The reverse-lower price lows with higher RSI lows-suggests weakening downward momentum: bullish divergence. No. Overbought means strong recent gains, not a coming fall. RSI is a clue, not a forecast.