RSI Indicator: How to Select Stocks for Swing Trading
What is RSI? The Relative Strength Index (RSI) is a momentum indicator developed by J. Welles Wilder Jr. . It measures the speed and strength of a stock's price movement on a scale of 0 to 100 . RSI helps traders identify: Overbought stocks Oversold stocks Trend reversals Strong momentum stocks RSI Levels and Meaning RSI Value Interpretation Above 70 Overbought (possible correction) Below 30 Oversold (possible bounce) 50-70 Bullish momentum 30-50 Bearish momentum How to Use RSI for Stock Selection 1. Buy on RSI Breakout Above 50 When RSI crosses above 50, it indicates buyers are gaining strength. Entry: RSI crosses above 50 Stock price above 200 EMA Volume increases Example: If a stock's RSI moves from 45 to 55 while trading above the 200 EMA, it can signal a potential uptrend. 2. Find Oversold Stocks Look for stocks with RSI below 30. Conditions: RSI below 30 Price near strong support RSI starts moving upward This may indicate a good buying opportunity...