RSI >70 Is Often a BUY Signal (Yes, Really)

Three Scenarios Where You Should Pay Attention

Okay, so RSI >70 doesn't automatically mean sell. But there ARE times when RSI extremes are actionable.

Scenario 1: Ranging Market + 7/7 Harmonic Agreement

Common Mistakes (And How to Fix Them)

Mistake #1: Fading RSI 70 in uptrends

Fix: Only fade RSI extremes in RANGING regimes. In trends, RSI >70 is confirmation, not potential reversal signal.

Mistake #2: Ignoring regime context

Fix: Always identify regime first. Use Volume Oracle or multi-timeframe EMA alignment to determine trend vs. range.

Mistake #3: Trading RSI alone without confluence

Fix: Require Harmonic Oscillator agreement (6-7/7) + structural confirmation (Janus, Plutus) before potential entry.

RSI Divergence Patterns: Early Warning System

Divergences occur when price and RSI move in opposite directions. While not standalone entry signals, they're powerful early warning indicators—especially when combined with regime context.

Example: Regular Bearish Divergence on ES Futures (May 2024)

Setup:
May 15: ES hits 5,321 (new high), RSI = 68.4
May 21: ES hits 5,340 (higher high +19 points), RSI = 63.8 (lower high)
→ BEARISH DIVERGENCE DETECTED

Pattern:
Price making higher highs, but RSI making lower highs
= Buying pressure weakening despite price increase
= Warning sign, not entry signal yet

Confirmation:
May 23: ES breaks below 5,310 support (structure break)
→ Now it's tradeable

Trade:
Entry: Short at 5,307 (after structure break)
Stop: 5,345 (above divergence high, -38 points risk)
Target: 5,220 (prior support, +87 points reward)
Risk/Reward: 1:2.3

Result:
ES dropped to 5,214 over next 4 days (-2.5% move)
Divergence warned early, structure break confirmed entry

Critical rule: NEVER trade divergence alone. Wait for structure to break (failed higher high, sweep, support/resistance flip). Divergence is a warning to watch closely, not a signal to enter immediately. Without structural confirmation, divergence can persist for weeks while price continues trending.

Multi-Timeframe RSI Alignment: Conviction Indicator

Single-timeframe RSI is noisy. Multi-timeframe RSI alignment—when multiple timeframes show the same RSI condition—dramatically increases probability.

The 3-Timeframe RSI Framework:

1. Higher Timeframe (HTF): 4x your trading timeframe (if trading 15-min, use 1-hour)
2. Trading Timeframe (TF): Your main chart timeframe
3. Lower Timeframe (LTF): 1/4 your trading timeframe (if trading 15-min, use 5-min)

High-Probability Setups Require Alignment:

Example: Triple RSI Alignment on QQQ (Trading 15-min chart)

Setup (June 12, 10:30 AM):
HTF (1-hour): RSI = 58.2 (bullish regime)
TF (15-min): RSI = 44.8 (pullback within uptrend)
LTF (5-min): RSI = 38.4 (oversold on lower timeframe)

Analysis:
Higher timeframe bullish (RSI >50) = trade WITH uptrend
Trading timeframe pulled back to 44.8 (healthy pullback zone)
Lower timeframe oversold = tactical entry timing

Trade:
Entry: Buy QQQ $453.20 when LTF RSI crosses back >40
Stop: $452.50 (below recent swing low, -$0.70 risk)
Target: $456.00 (recent high, +$2.80 reward)
Risk/Reward: 1:4.0

Execution:
10:35 AM: LTF RSI crosses 40 → Entry at $453.20
10:45 AM: TF RSI back to 52 (momentum returning)
11:20 AM: QQQ hits $456.10, exit

Result:
Profit: $2.90/share on 200 shares = +$580
Key: HTF bullish, bought TF pullback, LTF timed entry perfectly

RSI + Volume/Order Flow Confluence: Professional Edge

RSI alone shows overbought/oversold. RSI + volume/order flow shows WHO is driving the move (retail vs. institutions)—the real edge.

The Confluence Framework:

Example: RSI + Volume Divergence on SPY (Reversal Signal)

Setup (March 8, 2:45 PM):
SPY rallying: $518 → $521 (+0.6%)
RSI: 72.4 (overbought in uptrend)
Volume: Declining (rally on lighter volume each leg up)
Plutus Flow: Red bars (more selling than buying despite price up)

Analysis:
Price + RSI = looks bullish (overbought in uptrend)
Volume + Delta = WARNING (rally on declining volume, negative delta)
= Retail buying the top, institutions distributing

Divergence:
Price making higher highs, but volume declining + delta negative
= Unsustainable rally, exhaustion likely

Trade:
Wait for structure break (SPY fails to hold $521)
Entry: Short SPY $520.40 (after failed breakout)
Stop: $521.80 (above recent high, -$1.40 risk)
Target: $517.50 (support, +$2.90 reward)

Result:
SPY reversed to $517.20 by close (-0.6% move)
RSI showed overbought, but VOLUME showed distribution
Confluence gave early warning before reversal

Professional approach: RSI tells you overbought/oversold. Volume/delta tells you WHO is in control. Combine them: RSI >70 + high volume + positive delta = institutions driving = stay long. RSI >70 + low volume + negative delta = retail FOMO = fade it. This is how professionals separate sustainable moves from exhaustion traps.

⚡ Quick Wins for Tomorrow (Click to expand)

Don't overwhelm yourself. Start with these 3 actions:

1. Identify current regime — Is your main chart trending or ranging? Check Volume Oracle
2. Watch RSI tomorrow — If trending: Does RSI >70 = continuation? If ranging: Does RSI >70 = reversal?
3. Journal it — "Regime: Trending. RSI: 76. Outcome: Continued up. ✓"

After tracking 10 RSI signals with regime context, you'll stop fading trends. The pattern will become obvious.

Educational only. Trading involves substantial risk of loss. Past performance does not guarantee future results.