Is the RSI falling back after touching 70 three times in a row a sell signal?

When RSI touches 70 three times then falls, it may signal weakening momentum—especially with bearish divergence or trendline breaks—potentially indicating a sell opportunity, but confirmation via price action and volume is essential.

Jul 27, 2025 at 02:15 pm

Understanding the RSI Indicator and Its Thresholds

The Relative Strength Index (RSI) is a momentum oscillator widely used in technical analysis to measure the speed and change of price movements. It operates on a scale from 0 to 100, with key thresholds typically set at 70 for overbought conditions and 30 for oversold conditions. When the RSI reaches or exceeds 70, it suggests that an asset may be overbought, indicating a potential reversal or pullback. Traders often interpret this as a signal that upward momentum is weakening and that a price correction could follow.

An RSI value above 70 does not automatically mean a sell signal. It merely indicates that the asset has been rising strongly and may be due for a correction. The repeated touching of the 70 level—especially three times in a row—can reflect sustained bullish momentum rather than immediate exhaustion. However, when the RSI starts to fall after these repeated peaks, it may signal a shift in momentum. This behavior is often analyzed in the context of divergence, trend strength, and market structure.

Interpreting Multiple RSI Touches at 70

When the RSI touches 70 three consecutive times, it suggests that buying pressure has repeatedly pushed the price to elevated levels. Each touch may represent a new wave of bullish sentiment. However, the critical observation comes when the RSI begins to fall back from the 70 level after the third touch. This decline may indicate that the buying momentum is starting to weaken, even if the price continues to rise.

Key considerations include:

• Whether the price is making higher highs while the RSI fails to surpass previous peaks (bearish divergence).
• If the RSI peaks are lower than the prior ones, forming a descending pattern despite rising prices.
• The volume and volatility during these RSI peaks—declining volume on the third peak may support a weakening trend.

These factors help determine whether the drop in RSI is a temporary pullback or the beginning of a broader reversal.

Is a Drop After Three 70-Touches a Sell Signal?

A falling RSI after three consecutive touches of 70 can be interpreted as a potential sell signal, but only under specific conditions. The signal gains strength when combined with other technical confirmation tools. For example:

• Bearish divergence: If the price makes a new high but the RSI makes a lower high, this divergence strengthens the case for a reversal.
• Break of a rising RSI trendline: Drawing a trendline connecting the RSI lows during the uptrend—if the RSI breaks below this line, it adds validity to the sell signal.
• Candlestick reversal patterns at resistance, such as shooting stars or bearish engulfing patterns, appearing as the RSI drops.

It is crucial to avoid acting on the RSI alone. The context of the broader market trend, support/resistance levels, and volume must be evaluated. In a strong bull market, repeated RSI overbought readings are common and do not necessarily precede a major reversal.

How to Trade This RSI Pattern: Step-by-Step Guide

If you observe the RSI touching 70 three times and then falling, consider the following steps before initiating a trade:

• Confirm the price structure: Check if the asset is approaching a known resistance level or if there is a historical price ceiling nearby.
• Look for bearish divergence: Compare the latest price high with the RSI peak. If the price is higher but the RSI is lower, note this as a warning sign.
• Draw RSI trendlines: Connect the lowest points of the RSI during the uptrend. A break below this trendline increases the likelihood of a downward move.
• Wait for price confirmation: Do not short immediately. Wait for a bearish candlestick pattern or a close below a short-term moving average (e.g., 9-period EMA).
• Set entry and stop-loss: Enter on a retest of a broken support level or after a confirmed breakdown. Place a stop-loss above the most recent swing high to manage risk.
• Use volume analysis: Declining volume on upward moves and rising volume on down moves support the bearish case.

This structured approach reduces false signals and aligns the RSI behavior with price action.

Common Misinterpretations of RSI Behavior

Many traders misinterpret the RSI by treating overbought and oversold levels as direct buy or sell signals. In reality, in strong trends, the RSI can remain above 70 for extended periods. For example, during a powerful bull run, the RSI may touch 70 multiple times and still continue upward. Assuming each drop from 70 is a sell signal can lead to premature short entries and losses.

Another common mistake is ignoring the timeframe. On lower timeframes (e.g., 5-minute or 15-minute charts), RSI signals are more volatile and prone to noise. The same pattern on a daily chart carries more weight. Additionally, asset-specific behavior matters—some cryptocurrencies like Bitcoin or Ethereum may exhibit different RSI characteristics compared to low-cap altcoins due to liquidity and market depth.

Combining RSI with Other Indicators for Confirmation

To increase the reliability of an RSI-based sell signal, combine it with complementary tools:

• Moving Averages: A drop in RSI coinciding with price crossing below the 50-day or 200-day moving average adds confirmation.
• MACD (Moving Average Convergence Divergence): Look for a bearish MACD crossover (signal line crossing below MACD line) as the RSI declines.
• Bollinger Bands: If the price is near the upper band and the RSI falls from 70, it may indicate a return to the mean.
• Volume Profile: A lack of volume at new highs during the third RSI peak suggests weak participation.

Using multiple indicators helps filter out false signals and provides a more holistic view of market conditions.

Frequently Asked Questions

What does it mean if the RSI hits 70 four times instead of three?

Repeated touches above 70 suggest strong bullish momentum. Four touches may indicate a powerful uptrend, and a sell signal should only be considered if accompanied by clear divergence or breakdown in price structure.

Can the RSI stay above 70 without a correction?

Yes, especially in parabolic price moves. In strong bull markets, the RSI can remain above 70 for several periods. This does not invalidate the indicator but highlights the need to use it in context.

Should I sell immediately when the RSI drops from 70 after the third touch?

No. Wait for confirmation through price action, volume, or additional indicators. Entering a trade solely on RSI movement increases risk.

Does this RSI pattern work the same on all cryptocurrencies?

Not necessarily. High-volatility altcoins may generate more false signals due to pump-and-dump behavior. Major cryptocurrencies with higher liquidity tend to produce more reliable RSI patterns.