The RSI — Relative Strength Index — is a momentum gauge that runs from 0 to 100, flagging when a stock may be overbought and stretched, or oversold and due for a bounce.
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and size of recent price changes and plots the result on a 0 to 100 scale. Developed by J. Welles Wilder, it answers one question: is the recent buying or selling pressure getting overextended?
The two famous thresholds are 70 and 30. An RSI above 70 suggests the stock is overbought — it has rallied hard and may be due for a pause or pullback. An RSI below 30 suggests it's oversold — it has dropped sharply and may be due for a bounce. The midline at 50 separates bullish from bearish momentum.
RSI's most respected use is divergence. If price makes a new high but RSI makes a lower high, momentum is fading even as price rises — a bearish warning. The reverse (price lower low, RSI higher low) is a bullish signal that selling is running out of steam.
RSI is a guide, not a trigger. In a strong trend a stock can stay overbought or oversold for a long time, so “overbought” alone is not a sell signal. Traders combine RSI with support and resistance and moving averages for confirmation.
Train your timing: RSI is about feeling momentum stretch. Practice reading momentum and calling reversals in the up/down prediction game.
Not advice: educational content only. For authoritative basics see the SEC at investor.gov.
Related: technical analysis basics, the MACD indicator, and moving averages explained.
The RSI, or Relative Strength Index, is a momentum gauge on a 0 to 100 scale that shows whether a stock's recent gains or losses have become overextended.
An RSI above 70 suggests a stock is overbought and may pull back; an RSI below 30 suggests it is oversold and may bounce. The 50 midline separates bullish from bearish momentum.
Divergence is when price and RSI disagree — for example price makes a new high but RSI makes a lower high, warning that momentum is fading even though price is still rising.
Not on its own. In a strong trend a stock can stay overbought for a long time, so traders use RSI alongside support, resistance and other tools rather than as a standalone trigger.