Readings above and below can give the indicator a bullish or bearish angle. The centerline for the RSI is 50 on the scale. As in the above example, divergences that happen after an overbought or oversold reading frequently provide more reliable signals. Because of how the RSI is constructed, the underlying stock will often reverse its direction shortly after such a divergence. As an example, investors could consider a falling stock whose RSI rises from a low point of (for example) 20 back up to say, 55. If the long-term trend is bullish, then oversold readings could signal potential entry levels.īuy and sell signals can also be found by looking for positive and negative divergences between the RSI and the stock in question. Some traders spot the long-term trend and then use extreme readings as possible entry points. On the other hand, if the RSI falls below 70 on the scale, it is considered a bearish signal. In general, if the RSI rises above 30 on the scale, it is considered a bullish signal for the stock in question. Wilder suggested using 70 and 30 as the overbought and oversold levels respectively. Welles Wilder, recommend using 14 periods as a standard parameter for optimal calculations. Most traders, including the RSI calculations founder, J.
The RSI takes a single parameter, the number of time periods to use in the calculation. The RSI technical indicator compares the extent of a stock's recent gains to the extent of its recent losses and converts that information into a number that ranges from 0 - 100. Outside of the ability to pick which RSI filter you prefer, investors are also able to filter results by exchange, price and volume. The 50 level is considered the mid-way point and readings below 50 generally are bearish while readings above 50 are generally seen as bullish for a particular stock. Technical stock traders suggested using 70 and 30 as the overbought and oversold levels respectively.
This Relative Strength Index (RSI) stock scan allows investors to search for specific stocks that have recently had the RSI technical indicator break through various different oversold and overbought levels.
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