RSI Crude Oil Trading Technical Analysis & RSI Oil Trade Signals

Created by J. Welles Wilder, described in the book "New Concepts in Technical Trading Systems".

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

Relative Strength Index measures the momentum of oil; 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 drawn to identifying over bought & oversold levels are i.e. 70/30 levels respectively.

Crude Oil Trading Technical Analysis & How to Generate 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 signal is given.
• Sell Oil Signal - when the indicator crosses below the 50 a sell/bearish signal is given.

RSI Oil Trading Chart Patterns

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

Crude Oil Trading Support/Resistance Break outs

RSI is a leading indicator & 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 oil trading price is about to break resistance & support zones.

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 trading signals such as when RSI turns up from below 20 after oversold, buy & 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 Crude 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 website.