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Sri Lanka Equity Forum » Stock Market Charts & Graphs » Chart Pattern - Relative Strength Index (RSI)

Chart Pattern - Relative Strength Index (RSI)

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1 Chart Pattern - Relative Strength Index (RSI) on Sun Apr 24, 2011 8:15 pm

Quibit

avatar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
[You must be registered and logged in to see this image.]

Relative Strength Index is a technical indicator that compares the magnitude of recent losses to recent gains in order to identify overbought and oversold conditions of a stock. If you are keen to know the formula of this indicator, it is as follows:

[You must be registered and logged in to see this image.]

The value of this indicator could range between 0 and 100 and let's look at this graphically to get a better understanding.

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BUY/SELL Signals

If the RSI falls below 30 the stock is oversold and gives a bullish (BUY) signal and if the RSI moves above 70 the share is considered to be overbought and as such gives a bearish (SELL) signal. When you are using the RSI to predict stock price movements you should remember the fact that, large movements up or down in the stock price would result in false buy or sell signals. Therefore, it is very important that you use this tool along with other stock picking tools and not in isolation.

Further, to interpret buy or sell signals you can also look at the RSI along with the price movement of the stock. In the above graph the upper section depicts the price movements of the share and the lower part depicts the RSI ranging from 0 to 100. When the price of a security deviate from the corresponding Relative Strength Index on that security it gives an advance warning of a possible trend reversal. That is to say the Price and the RSI could move in the same direction or in the opposite direction.

You will note from the above graph that the price and the RSI both could either move up or down. If both the price and RSI move up it is a BUY signal and it is a SELL signal if the price and RSI are both falling.

On the other hand, the price and RSI could move in opposite directions. In such an instance, if the price is rising and the RSI is falling it is a SELL signal and when the price is falling and the RSI is rising it is a BUY signal.

Sri Lanka Equity Analytics
www.srilankaequity.com

dilshanusjp


Senior Equity Analytic
Senior Equity Analytic
thnks nice to see this.are there any softwares to calculate RSI fr investors personaly in CSE market

RichDad

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Manager - Equity Analytics
Manager - Equity Analytics
Thanks Quibit. This is helpful.

Please enlighten us on 'momentum' as well.

RichDad

avatar
Manager - Equity Analytics
Manager - Equity Analytics
Thanks Quibit. This is helpful.

Please enlighten us on 'momentum' as well.

cmnet123

avatar
Senior Equity Analytic
Senior Equity Analytic
@dilshanusjp wrote:thnks nice to see this.are there any softwares to calculate RSI fr investors personaly in CSE market

DirectFN Tws....Meta Stock.

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
So far I have not used charts patterns to take investment decisions bcs I have avery little knowledge of that. But sometimes I follow others views who use these charts. Quibit , it is realy interesting to read your post.I think if we could use these charts we could deal with any idea.

JennyFunny


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
great thanks..

dilshanusjp


Senior Equity Analytic
Senior Equity Analytic
thanks alot

Quibit

avatar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@RichDad wrote:Thanks Quibit. This is helpful.

Please enlighten us on 'momentum' as well.

http://forum.srilankaequity.com/t2947-chart-pattern-stochastic-oscillator

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Quibit,

what are applications available to draw such charts?
what is the source for down loading.

harshana4


Stock Analytic
Stock Analytic
In RS what do you mean by 'up' closes and 'down' closes...is that mean days high and low or any other ?

Roboticfx

avatar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Thanks a lot. Good Work!

laki


Senior Equity Analytic
Senior Equity Analytic
ela ela good work

pathfinder

avatar
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@worthiness wrote:Quibit,

what are applications available to draw such charts?
what is the source for down loading.

can do it with Direct FN

day_lk


Equity Analytic
Equity Analytic
GREATE POST.TKANKAS.

sachithgh

avatar
Equity Analytic
Equity Analytic
Interasting
Thank for sharing with us.............

jehovah

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Equity Analytic
Equity Analytic
thanks.... Laughing

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