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Conversely, an oversold condition occurs when the stock's price has declined significantly in a short period, potentially indicating a short-term reversal or a bounce. An RSI value below 30 is generally considered oversold.

It is important to note that these thresholds are not absolute, and different market conditions or stocks may require adjustments to these levels.

Importance of RSI in Day Trading

For day traders, the RSI is a valuable tool that can help identify potential trading opportunities based on changes in a stock's momentum. By analyzing overbought and oversold conditions, traders can determine the best entry and exit points for their trades, capitalizing on short-term price fluctuations.

RSI is also useful for identifying divergences between price and momentum. A bullish divergence occurs when the stock's price forms a lower low, but the RSI forms a higher low, indicating a potential reversal to the upside. Conversely, a bearish divergence occurs when the stock's price forms a higher high, but the RSI forms a lower high, signaling a potential reversal to the downside.

Combining RSI with Other Technical Indicators

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