Relative Strength Index indicates the
internal strength of the security. RSI is also interpreted as a
divergence indicator.
When divergence occur between RSI and the price of the security (when price
tends higher and RSI tends lower or when price tends lower and RSI tends
higher) a trend reversal may occur.
When the RSI is higher than 70 it indicates the market tops and when the RSI is
below 30 it indicates the market bottoms.
RSI is also used to identify support and resistance levels.
Calculation of RSI is beyond the scope
of this article.
A moving average of RSI line is
plotted along with the RSI to help identifying trend.
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