RSI Stock Indicator Overbought & Oversold Levels

RSI technical indicator values of above 70 are considered to be over bought: stock traders consider points above the 70 level as market tops and good points for taking profits.

RSI technical indicator values of below 30 are considered to be over sold: stock traders consider points below the 30 level as market bottoms & good points for taking profits.

These overbought and oversold stock trading levels should be confirmed by RSI center line crossovers trading signals. If these regions give a market top or bottom, this stock signal should be confirmed with RSI center line crossover stock signal. This is because these overbought and oversold levels are prone to giving whipsaws in the stock market.

In the stocks trading example illustrated and explained below, when the RSI hit 70, it showed that the stock trading was overbought, & this could be considered a trading signal that the stock trend could reverse.

The stock chart then reversed the stock trend after a short while & started to move downward, until it got to the oversold levels. This was considered a stock market bottom after which the stock chart started to move upward again.

Overbought and Oversold Levels - RSI Stock Trading Strategies

Over Extended Overbought and Oversold Levels

When the stocks market is trending strongly upwards or downwards the RSI indicator will stay at these overbought and oversold levels for a long time. When this happens these overbought and oversold regions cannot be used as stock market tops and stock market bottoms because the RSI indicator will stay at these levels for an extended period of time. This is the reason why we say that the overbought and oversold regions are prone to stock trading whipsaws and it is best to confirm these stocks signals using RSI center-line crossover strategy.

Over Extended Overbought & Oversold Levels - RSI Stock Technical Indicator Strategy