Oversold: The price of an asset, such as a stock, is below its fair or intrinsic value and may be ready for a trend reversal to the upside on an RSI chart an oversold security scores at 30 or below.Overbought: The price of an asset, such as a stock, is above its fair or intrinsic value and may be ready for a trend reversal to the downside on an RSI chart an overbought security scores at 70 or above.Taking into account both an asset's price and its trading volume, investors use RSI to determine whether a stock is overbought or oversold: in his 1978 book, New Concepts in Technical Trading Systems. RSI was first introduced by American technical analyst J. Levels such as 80 or 20 indicate a stronger trend in upward or downward momentum, respectively.

The RSI is typically based on a 14-day time frame with high values being 70 or above, and low values being 30 or below. In stocks, the relative strength, or RS, is the ratio of higher closes to lower closes, and the RSI is the ratio of higher closes to overall closes. In the case of RSI, those lower and upper boundaries are 0 and 100. Once calculated, the RSI is displayed as an oscillator, which is a line graph between two extreme values. The relative strength index ( RSI) is a technical indicator that measures the momentum of a security based on its closing prices. Aksana Kavaleuskaya/iStock via Getty Images What Is Relative Strength Index In Stocks?

Relative strength index