| Relative Strength Index (RSI) |
| Relative Strength Index (RSI) is an indicator to determine overbought or oversold. The necessary data that we need to find RSI includes the average of the 'up close' and 'down close' in a given period. "Up close" is the positive difference between consecutive periods, sum of these value and take the average will get a "up close" value. "Down close" is the same working but take the negative difference. |
The RSI lies between 1 and 100. The index over 70 is regarded as overbuying of a security and the stock price may fall in the future. When RSI is below 30, it is regarded as oversold of a security and the price may rise soon.
The formula of RSI as follows:
The number of intervals used in RSI analysis is 14 and line of 5 moving average is also shown.
Figure: A RSI chart of Hang Seng Bank
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