> For the complete documentation index, see [llms.txt](https://docs.yummyprofit.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.yummyprofit.com/indicator-and-strategy/trading-strategy/rsi-divergences.md).

# RSI divergences

![](https://2651920125-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MeQWmYuJKno3prddyaS%2F-Mi7VvOseKwPKMHwBx7l%2F-Mi7_S_gGvL5PC2uF2nw%2Fimage.png?alt=media\&token=7db93e9e-c041-4c95-bb54-2385b38f2dc4)

THE RELATIVE STRENGTH INDEX (RSI) is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100.

![](https://2651920125-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MeQWmYuJKno3prddyaS%2F-Mi7VvOseKwPKMHwBx7l%2F-Mi7_YTKLUScCgXQwqjM%2Fimage.png?alt=media\&token=f7b899a0-6f68-4864-93ed-14168d4e13c7)

## Alert when

* Bullish signal: The RSI forms two rising lows that correspond with two falling lows on the price
* Bearish signal: The RSI forms a series of two falling highs that correspond with two rising highs on the price

## Indicator config

* RSI length: 14

## TIPs for trading

![](https://2651920125-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MeQWmYuJKno3prddyaS%2F-Mi7VvOseKwPKMHwBx7l%2F-Mi7aIKLdepcZiIgKGsc%2Fimage.png?alt=media\&token=be65299e-7113-4a06-b444-6d4551a40b2c)

![](https://2651920125-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MeQWmYuJKno3prddyaS%2F-Mi7VvOseKwPKMHwBx7l%2F-Mi7aMM8oyiNGT56BlYn%2Fimage.png?alt=media\&token=2a86e5d6-1af9-4dfa-bcf8-1aa82fda963b)

A bullish divergence occurs when the RSI creates an oversold reading followed by a higher low that matches correspondingly lower lows in the price. This indicates rising bullish momentum, and a break above oversold territory could be used to trigger a new long position.

A bearish divergence occurs when the RSI creates an overbought reading followed by a lower high that matches corresponding higher highs on the price.

As you can see in the following chart, a bullish divergence was identified when the RSI formed higher lows as the price formed lower lows. This was a valid signal, but divergences can be rare when a stock is in a stable long-term trend. Using flexible oversold or overbought readings will help identify more potential signals.

## Tradingview Script

{% embed url="<https://www.tradingview.com/script/0TgfxuaU-YummyProfit-RSI-Divergence/>" %}