RSI (Relative Strength Index) — Stock Market Glossary

RSI — Relative Strength Index

RSI (Relative Strength Index) is a momentum oscillator that measures the speed and magnitude of recent price changes. It was developed by J. Welles Wilder Jr. in 1978 and remains one of the most popular technical indicators.

How to Read RSI

RSI is expressed as a number between 0 and 100:

RSI Value	Interpretation
RSI ≥ 70	Overbought — the stock may have risen too fast; potential pullback ahead
RSI 30–70	Neutral — normal trading range
RSI ≤ 30	Oversold — the stock may have fallen too fast; potential bounce ahead

This site shows the 14-day RSI, which is the standard calculation period.

How It’s Calculated

RSI compares the average gains to average losses over a 14-day period:

Calculate average gain and average loss over 14 days
Relative Strength (RS) = Average Gain ÷ Average Loss
RSI = 100 − (100 ÷ (1 + RS))

How It’s Used on This Site

RSI is a key filter in three of our strategies:

🚀 Moon Shot — Looks for stocks with RSI < 70 and high beta. The idea: volatile stocks that aren’t yet overbought have room to run.
🔪 Falling Knife — Actively seeks low RSI (oversold) stocks below their 200-day moving average. Contrarian bet on a bounce.
🎈 Over-Hyped — Targets stocks with high RSI (overbought). These are potential candidates for mean reversion or short positions.

On individual ticker pages, the RSI badge is color-coded:

🔴 Red = RSI ≥ 70 (overbought)
🟢 Green = RSI ≤ 30 (oversold)
⚫ Gray = RSI between 30–70 (neutral)

Limitations

RSI is a lagging indicator based purely on price history. A stock can remain overbought or oversold for extended periods, especially in strong trends. Always use RSI alongside other indicators rather than in isolation.

Beta — Measures volatility magnitude; RSI measures directional momentum
Moving Average (200-Day) — Often used in combination with RSI to confirm trends
52-Week High / 52-Week Low — RSI extremes often correlate with price extremes