The Relative Strength Index compares the size of recent up days with recent down days (usually over 14 days) and puts the result on a scale from 0 to 100.
- Above 70: often called overbought; the stock has risen fast.
- Below 30: often called oversold; it has fallen fast.
- Around 50: no strong momentum either way.
How traders use it
- In strong uptrends RSI can stay above 70 for weeks, so overbought is not by itself a reason to sell.
- Many use RSI crossing back above 30 (or below 70) as the signal, rather than the level itself.
- A divergence (price makes a new high but RSI does not) can warn that momentum is fading.