The Relative Strength Index (RSI) measures momentum. It captures the speed and change of price movements. RSI oscillates between the ranges 0 to 100. When the oscillator is below 30, the stock is considered oversold. When the oscillator is above 70, the stock is considered overbought.
Ways to Interpret the Relative Strength Index (RSI) Oscillator
Interpretation of the Relative Strength Index (RSI)
Buy
When the oscillator is below 30.
Buy
When the oscillator crosses the 30 line upwards.
Sell
When the oscillator is above 70.
Sell
When the oscillator crosses the 70 line downwards.
Look for the Following Divergences
Divergences
Identify a Bottom Forming
When the price of the stock goes lower but the Stochastic Oscillator goes higher.
Identify a Top Forming
When the price of the stock goes higher but the Stochastic Oscillator goes lower.
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