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Does the 'Overbought: RSI above 70' chart pattern work? 2,606,324 occurrences say: repeats, negative

FormationsPublished Friday, September 25, 2026Data through 2026-09-25

Overbought: RSI above 70 — 14-day RSI over 70. Across 8,029 stocks and 1994–2026 it occurred 2,606,324 times. Measured against the S&P 500 over the next 21 trading days, it returned -0.09% before 2018 and -1.26% since. Verdict: repeats, negative — it lagged the market in both eras.

Occurrences

2,606,324

21d vs SPY · pre-2018

-0.09%

21d vs SPY · 2018+

-1.26%

Hit rate · all

47%

t-stat · all

-9.5

Line chart of the average market-adjusted return in the 63 trading days after 'Overbought: RSI above 70'

A pattern only counts as real if the two eras agree. Where the amber and green lines diverge, the pre-2018 result did not survive.

Versus the average stock

The honest yardstick is the pattern's return minus the baseline for the era, because the average stock itself trailed the index badly after 2018 (-0.92% over 21 days). Relative to that baseline, "Overbought: RSI above 70" ran -0.30% before 2018 and -0.43% since.

The spread of outcomes

Histogram of outcomes after 'Overbought: RSI above 70'

The spread of individual outcomes dwarfs the average tilt. This is a description of history, not a prediction.

How the study was built

Every occurrence across 8,029 US stocks and up to 32 years of daily prices — 12,100,953 events across all sixteen formations. Outcomes are market-adjusted (the stock minus SPY over the same days), clipped at -50%/100% so one 10× stock cannot own an average, and days are clustered so 3,000 stocks crashing together count once. Everything is split at 2018: a pattern is only real if it holds in both halves. The full table of all sixteen is free to read.

The interactive study, and the arrows on your charts

Members get the Formations page with every pattern's path and distribution, plus the ThinkorSwim study that plots the five surviving formations on any chart with the measured outcome printed beside each arrow.

Open the Formations page Free ThinkorSwim indicator

Questions this post answers

Does the 'Overbought: RSI above 70' chart pattern work?

Across 2,606,324 occurrences since 1994, the market-adjusted return over the next 21 trading days was -0.09% before 2018 and -1.26% since. Verdict: repeats, negative — it lagged the market in both eras.

How is 'Overbought: RSI above 70' defined here?

14-day RSI over 70.

Which chart patterns actually work?

Of sixteen tested, five repeat in both eras — four of them negative (one-day pops, vertical runs, two-sigma band breaks and RSI above 70 all lag the market afterwards) and one positive (a pullback in an uptrend). Three flipped sign after 2018, one faded, and seven — including the golden cross and death cross — are indistinguishable from noise.

Is this a buy or sell signal?

No. These are average tilts of a fraction of a percent with a spread of outcomes many times larger. Historical description, not investment advice.

Formations guide All sixteen formations

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Built from SEC EDGAR ownership filings. Only open-market purchases (transaction code P) and sales of $1M or more are counted; grants, option exercises and tax withholding are excluded because they run on schedules set years earlier. Historical description, not a prediction, and not investment advice.