RSI 85 Over bought how to signl Revesal - Find exhaustion

 An RSI of 85 indicates extreme momentum, not an automatic reversal. In strong uptrends, prices often continue to rise while the RSI remains "overbought" for days or even weeks. [1, 2, 3, 4]

Traders identify the actual "stop" or reversal point by looking for exhaustion signals rather than just a high number. [1, 2, 3]
1. Watch for Bearish Divergence
This is the most reliable "stop" signal. [1, 2]
  • The Setup: Price makes a higher high, but the RSI makes a lower high.
  • What it means: The price is still going up, but the speed and strength of the buying are fading. The "fuel" for the move is running out. [1, 2, 3, 4, 5]
2. Monitor Price Action & Volume
A high RSI is just a warning; price action provides the confirmation. [1, 2]
  • Volume Drop: If the price hits a new high but trading volume is lower than previous peaks, it shows a lack of conviction from buyers.
  • Rejection Candles: Look for "Shooting Star" or "Pin Bar" patterns—candles with long upper wicks—showing that sellers are starting to push back at high prices.
  • Break of Structure: A reversal is often confirmed only when the price breaks below a previous swing low or a key moving average (like the 20-day SMA). [1, 2, 3, 4]
3. The "Swing Rejection" Signal
Instead of selling at 85, many traders wait for the RSI to cross back below 70. [1]
  • Step 1: RSI enters overbought territory (above 70).
  • Step 2: RSI drops back below 70.
  • Step 3: RSI attempts to rise again but fails to make a new high.
  • Step 4: RSI breaks its most recent low. This "M-shape" in the RSI is a classic sell

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