RSI (Relative Strength Index)

A momentum oscillator measuring the speed and change of price movements on a 0-100 scale.

What Is the RSI?

The Relative Strength Index (RSI) is one of the most popular technical indicators in trading. Created by J. Welles Wilder in 1978, it measures the magnitude of recent price changes to evaluate whether a stock is overbought or oversold on a scale of 0 to 100.

How to Read RSI

• Above 70: The stock is considered overbought — it may have risen too fast and could be due for a pullback.
• Below 30: The stock is considered oversold — it may have fallen too far and could be due for a bounce.
• Around 50: Neutral momentum — neither overbought nor oversold.

RSI Divergence

One of the most powerful RSI signals is divergence. If a stock makes a new price high but the RSI makes a lower high, this is called bearish divergence — it suggests the uptrend is losing momentum. The opposite (new price low + higher RSI low) is bullish divergence and suggests a potential reversal to the upside.

RSI Before Earnings

Watching a stock's RSI before an earnings report can provide useful context. An overbought RSI heading into earnings means expectations are very high — the bar is set high for a beat. An oversold RSI means expectations are low — even a modest beat could trigger a strong rally.