Often, the indicator should come to this area again, fix the state of the moderate overbought (oversold) and a bullish divergence / bearish convergence and leave the area. If the indicator, fixing the state of the moderate overbought (oversold), came from this area, we expect the bearish (bullish) price reversal.Įxiting the overbought (oversold) zone, after the state of extreme overbought (oversold), as a rule, does not lead to a price reverse. Moderate overbought (oversold) occurs when the indicator is in the overbought (oversold) zone less than 5 bars. Thomas Demark singled out two overbought or oversold conditions: extreme and moderate.Įxtreme overbought (oversold) occurs when the indicator is in the overbought (oversold) zone more than 5 bars. How to determine the strength of the trend: Overbought / oversold An example of a DeMarker Indicator bullish divergence.
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