RSI Oil Technical Analysis & RSI Crude Oil Trade Signals

Developed by J. Welles Wilder, explained in the book "New Concepts in Technical Trading Systems".

Relative Strength Index is the most popular indicator and it is a momentum oscillator and a oil trend following indicator. RSI compares a trading crude oil price magnitude of the recent crude oil price gains against its magnitude of recent losses crude oil price losses & plots this data on a scale of values which ranges between 0-100.

Relative Strength Index measures the momentum of a oil instrument: values above 50 signify bullish momentum while values below 50 center-line signify bearish momentum.

• RSI is drawn as a green line
• Horizontal dashed lines are plotted to identifying overbought & oversold levels are i.e. 70/30 levels respectively.

Oil Technical Analysis & Generating Crude Trading Signals

There are several techniques used to trade, these are:

50-level Crossover Signals

• Buy signal - when the indicator crosses above 50 a buy/bullish trading signal is given.
• Sell Oil Trading Signal - when the indicator crosses below 50 a sell/bearish trading signal is given.

RSI Crude Trading Chart Patterns

Traders can draw oil trend lines and map out oil chart patterns on the RSI indicator. The Relative Strength Index often forms oil chart patterns such as head & shoulders oil pattern which might not have formed clearly on the crude oil price chart.

Oil Trading Support/Resistance Breakouts

RSI is a leading indicator and can be used to predict Support/Resistance Breakouts before crude oil price breaks its support/resistance level. RSI uses the swing failure signal to predict when crude oil price is about to break support and resistance areas.

Swing Failure - Support & Resistance Breakout

Overbought/Oversold Conditions on Indicator

• Overbought- levels above 80
• Oversold- levels below 20

These levels can be used to generate oil signals such as when RSI turns up from below 20 after oversold, buy and sell when RSI crosses to below 80 after overbought, sell. These signals are not suitable for trading Oil Trading because they are prone to a lot of fakeouts.

Divergence Oil Trading Setups

Divergence trading is one of the technical analysis method used to trade reversals of the crude oil price trends. There are 4 types of divergences that can be traded with this indicator covered in the divergence tutorial on this web site.