The Momentum Zone Principle is what we call our context application of RSI. There are four zones (from top to bottom):
- Sustainable Bull – Above 67 (upper blue) – Implies any pullback from this level will be corrective.
- Bear Resistance – 50-63 (in grey) – When a wave structure moves up and the RSI reaches into this zone, but not above, the trend is either sideways or still down.
- Bull Support – 38-50 (in blue) – When a price decline falls into this RSI zone, but not below, the trend is likely still up or sideways.
- Sustainable Bear – Below 34 (lower grey) – Implies any rally starting out from this low level is better to be considered corrective.
Each timeframe will show a different pattern, so it’s important to coordinate one larger timeframe in the analysis.