The indicator that predicted a reversal that led to the ATH run now shares another reversal sign
One of the most popular technical indicators in market analysis—the Relative Strength Index—has reached extremely low values previously observed back in March 2020, which were caused by the global financial crisis.
Why This Could Be The First Sign Of A Reversal
The Relative Strength Index is often used to determine current market conditions and signal reversal points once price reaches oversold or overbought values.
The indicator is also used to find divergences against the price chart and then determine whether the trend on the asset is reversing.
But while divergences could be considered an additional way to use the indicator, finding oversold and overbought levels is the main way to use the relative strength index.
Can the indicator predict a full reversal?
While the RSI can give us a hint about the upcoming movement in the future, it is not a panacea against the bear trend since its signals are usually considered short term. Almost every reversal signal based on RSI stays active until the indicator’s values enter the “neutral” zone.
When it last dipped below the 25 value on the indicator in March 2020, Bitcoin reversed almost immediately, hitting a local high of $10,000. But while the indicator “predicted” a short-term reversal, the data provided by it did not suggest that the cryptocurrency would move to the new ATH in the next few months.
At press time, Bitcoin is trading at $35,865 after another unexpected drop that occurred during the asset’s correction that began back in November, when the digital gold was trading at almost $70,000.
