RSI & Momentum

Q: An RSI reading of 75 suggests the stock is:

Overbought and may pull back. RSI above 70 signals overbought conditions — the stock may have risen too far too fast.

Q: RSI below 30 is generally considered:

Oversold — a potential buy opportunity. RSI below 30 suggests oversold conditions — excessive selling may have pushed the price too low.

Q: RSI divergence occurs when:

Price makes new highs but RSI makes lower highs. Bearish divergence: price rises to new highs but RSI doesn't — suggesting weakening momentum.

Q: What period is RSI most commonly calculated over?

14 days. The default RSI period is 14 days, as proposed by Welles Wilder when he developed the indicator.

The Relative Strength Index (RSI) measures the speed and magnitude of price changes on a 0–100 scale. Above 70 is "overbought" — possibly due for a pullback. Below 30 is "oversold" — potentially a buying opportunity.

Quick quiz and answers

An RSI reading of 75 suggests the stock is:

Answer: Overbought and may pull back. RSI above 70 signals overbought conditions — the stock may have risen too far too fast.

RSI below 30 is generally considered:

Answer: Oversold — a potential buy opportunity. RSI below 30 suggests oversold conditions — excessive selling may have pushed the price too low.

RSI divergence occurs when:

Answer: Price makes new highs but RSI makes lower highs. Bearish divergence: price rises to new highs but RSI doesn't — suggesting weakening momentum.

What period is RSI most commonly calculated over?

Answer: 14 days. The default RSI period is 14 days, as proposed by Welles Wilder when he developed the indicator.

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