Published on: January 20, 2025
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a widely used momentum oscillator in technical analysis. It helps traders assess whether an asset is overbought or oversold and can signal potential reversal points. The RSI is measured on a scale from 0 to 100: values above 70 suggest overbought conditions, while values below 30 indicate oversold conditions.
The RSI is also useful for identifying divergence and convergence, which may point to potential market reversals. Divergence occurs when the price of an asset moves in the opposite direction of the RSI, potentially signalling that the current price trend is weakening.
Understanding Positive and Negative RSI
The RSI can reveal the prevailing market strength by showing whether it is in the positive or negative zone.
- Positive RSI: When the RSI is above 50, it indicates that buying pressure is dominant and the market is generally bullish. An RSI above 60-70 often signals overbought conditions, suggesting a potential market correction.
- Negative RSI: When the RSI is below 50, it implies that selling pressure is prevailing and the market is in a bearish phase. An RSI below 30 is typically considered oversold, which some traders interpret as a potential buying opportunity, expecting a market rebound.
Crossover Theory: Positive vs. Negative
RSI crossovers provide additional signals for possible trend reversals:
- Positive Crossover: This occurs when the RSI crosses an established threshold (e.g., moving from below 30 to above 30 or from below 50 to above 50). A positive crossover generally indicates increasing bullish momentum.
- Negative Crossover: This happens when the RSI falls below a set threshold, signalling that bearish momentum is gaining strength.
Using the RSI scanner, you can now check the RSI for over 500 stocks in few clicks.
Here is how you can do it.
- Login to RZONE with your credentials.
- Go to the Menu > Indicator Digger > RSI
- Select Chart type, Group and Time Frame.
Here are some stats from multiple indexes to understand the market scenario.
*Data as of close of 17th January 2025
