RSI is a mechanical indicator used in technical analysis;
this indicator can be used to find whether stock is overbought or
oversold. Along with this RSI has a very special purpose, it can find
out medium term trend in stocks or Nifty. How that I will show you, now
in RSI we have to important levels 30 level which is oversold region and
another 70 level considered as overbought region. Whenever RSI lands
above 70 then we say stock is overbought and some selling is expected,
if RSI reading is below 30 then we conclude stock is oversold and some
buying is expected. Above this there is another important level which is
50 level this level can be used to tell if stock is bullish or bearish
in medium term. No if RSI on weekly chart
is above 50 level then stock is bullish for medium term, if RSI shows
reading below 50 then we simply conclude stock is bearish in medium
term. Here we have an example to prove this works: On below chart you
can see RSI moved above 50 level and a fresh upside rally started and
RSI on moving below 50 created panic selling.
