V For Very Accurately Predicted Reversal

Showing The V Reversal Technique on The RSI

Sofien Kaabar, CFA
4 min readJun 13, 2024

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The Relative Strength Index (RSI) is a popular technical indicator used to measure the magnitude and velocity of recent price changes to evaluate overbought or oversold conditions in an asset. It’s based on the concept that when prices rise sharply, it’s likely that the asset is overbought, and when they fall sharply, it’s likely oversold.

This article shows how to create a technique called the V reversal on the RSI.

The Relative Strength Index (RSI)

First introduced by J. Welles Wilder Jr., the RSI is one of the most popular and versatile technical indicators. Mainly used as a contrarian indicator where extreme values signal a reaction that can be exploited. Typically, we use the following steps to calculate the default RSI:

  • Calculate the change in the closing prices from the previous ones.
  • Separate the positive net changes from the negative net changes.
  • Calculate a smoothed moving average on the positive net changes and on the absolute values of the negative net changes.
  • Divide the smoothed positive changes by the smoothed negative changes. We will refer to this calculation as the Relative Strength — RS.

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