RSI above 70: what it means, and what usually happened next
An RSI above 70 means a stock has risen on most of its recent days. It is usually called “overbought”. The figures below show what actually followed in Indian stocks.
What it measures
RSI, the relative strength index, compares the size of a stock’s recent up days with its recent down days. It runs from 0 to 100. Above 70, the gains over the last couple of weeks have clearly outweighed the losses.
How it is calculated
Take the last 14 trading days. Average the gains on the up days and the losses on the down days, smoothing each day’s figure into the previous average. Divide the average gain by the average loss to get a ratio, then convert it: RSI = 100 − 100 ÷ (1 + ratio). Most charting tools use this version, from J. Welles Wilder.
What happened next, in Indian stocks
These figures come from Sensifty’s monthly research and load here.
Why 70 is not the same for every stock
Some stocks spend weeks above 70 during every rally; for others, 70 is rare. A fixed line treats them alike. Comparing today’s RSI with the stock’s own past readings tells you whether this reading is unusual for that stock, which is the more useful question.
What it does not tell you
RSI describes momentum over the last few weeks. It says nothing about the business, the valuation, or when a rise will end. Strong stocks can stay above 70 for a long time.
Related
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.