Photo by Steve Johnson on Unsplash
 

You can produce consistent gains by rigorously buying and selling stocks using the relative strength index (RSI). Let me explain.
 

What Is the Relative Strength Index?

The relative strength index or RSI as described by Investopedia is “A momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100.”

Simply put:

• If the RSI indicator is showing a reading of 70 or higher (a conservative reading of a minimum of 65 is acceptable) it means the stock is in overbought territory and it’s now likely that a pullback is coming soon and, as such, it would be an ideal time to exit and wait for an opportunity to re-enter in the future.
• If the RSI is showing a reading of 30 or below it means the stock is now in oversold territory and could be considered undervalued and is due for a bounce higher and, as such, it would be a great time to enter into a position or add to an existing position. The number 30 should only be used as a gauge so, any reading of 35 or below can still make for a great entry point.
   

How To Use the RSI

To find the current RSI of a stock you are interested in go to StockCharts and enter the stock symbol in the small bar in the top left hand corner of the chart. The RSI is tracked along the top of the chart and highlighted when it falls to 30 and below (undervalued) and rises to 70 and above (overvalued). Please note that the RSI changes throughout the trading day as the stock price changes.
 

AI Stocks With Low Or High RSI 

LOW (as of the close on May 22nd)

1. Qualys (QLYS): 30.7
2. Unity Software (U): 30.7
3. D-Wave Quantum (QBTS): 33.4
4. Shopify (SHOP): 34.8
5. Tenable (TENB)" 34.8

HIGH (as of the close on May 22nd)

1. Innodata (INOD): 81.6
2. HP, Inc. (HPQ): 81.4
3. Lenovo (LNVGY): 79.4
4. Qualcomm (QCOM): 79.0
5. monday.com (MNDY): 77.2
6. Motorola (MSI): 69.7
7. Dell Technologies (DELL){ 68.1
8. Digimarc (DMRC): 68.0
9. Taiwan Semiconductor (TSM): 67.0
10. CrowdStrike (CRWD): 66.9
11. Monolith Power (MPWR): 66.5
12. KLAC Corp. (KLAC): 66.2
13. Microsoft (MSFT): 65.2
     

Summary

When the RSI of a stock drops below 35, and preferably 35, considering buying and then hold the stock until the RSI reaches 65, and preferably 70, and then sell. It’s that simple!

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