RSI below 30: what it means, and what usually happened next

An RSI below 30 means a stock has fallen on most of its recent days. It is usually called “oversold”, but that describes the recent past, not a bargain.

What it measures

RSI compares a stock’s recent up days with its recent down days, on a scale of 0 to 100. Below 30, the losses over the last couple of weeks have clearly outweighed the gains.

How it is calculated

Over the last 14 trading days, average the gains and the losses, smoothing each day into the previous average. RSI = 100 − 100 ÷ (1 + average gain ÷ average loss). When losses dominate, the ratio is small and RSI falls towards zero.

What happened next, in Indian stocks

These figures come from Sensifty’s monthly research and load here.

Why “oversold” can mislead

The word suggests the selling has gone too far. Sometimes it has; sometimes the stock is falling for a reason that has not finished. In our own testing, stocks that fell to the very bottom of their five-year range kept falling more often than not. A low RSI on its own does not separate the two.

What it does not tell you

RSI cannot tell you why a stock fell, or whether the reason has passed. It is a description of recent price moves, not a valuation.

Sensifty measures each of your stocks against its own history, and tells you once when a stretch cools off. Add to Chrome

Figures describe the past, among the 500 most traded NSE stocks at each date. They are not a forecast or a recommendation.