When it comes to short-term trading signals, few indicators are as closely tracked as the Relative Strength Index (RSI). A stock’s RSI measures the speed and magnitude of its recent price movements. A reading below 30 suggests a stock is oversold and potentially due for a bounce, while anything above 70 suggests a name may be overheated and due for a pullback.
While an overheated RSI can often be the result of a roaring rally that may be overheated but isn’t going anywhere, an extremely oversold RSI is seen as a more attractive reading if looking for a reversal trade.
