Relative strength index- rsi indicator and overbought oversold index.

Relative Strength Index (RSI Indicator)

The Relative Strength Index is a popular momentum oscillator developed by Welles Wilder, Jr. It is one of the most widely used technical indicators. Relative Strength Index compares upward vs. downward movements in closing over a selected period. The RSI Indicator fluctuates from 0% to 100%. A stock with RSI Indicator higher then 70% is considered overbought and lover then 30% oversold. A good rule is to adjust overbought oversold index range to 80% in bull and to 20% in bear market. Relative Strength Index can provide early warning but not the final signal. It should be used in conjunction with other stock picking techniques. The divergence between RSI Indicator and underlying stock price is the most important signal provided by RSI and can be an indication of an impending reversal. Using the rsi divergence (bullish and bearish), chart patterns, trendlines, support, and resistance lines along with the RSI Indicator chart can be very useful.