Relative Strength Index
Relative Strength Index (RSI) measures internal strength of the securities
price moves. RSI was first introduced by Welles Wilder in 1978. There are
several methods in analyzing RSI: RSI usually tops at a level of 70 and
bottoms at 30. High absolute value of RSI (>95) clearly shows that the
security has been overbought and a price reversal may take place. RSI also
sometimes better shows chart formations like head-and-shoulders that may
not be visible on the chart from the first glance. RSI may be used in
analyzing support levels and breakouts.
Typically RSI generates a buy signal when it has fallen to a low level
and is coming upward and a sell signal when it reaches a certain high
Relative Strength Index has one parameter: n - number of days, which is
usually equal to 9.