Understanding the Relative Strength Index (RSI)

The video explains the Relative Strength Index (RSI), an indicator used to determine if a stock is overbought or oversold. RSI values range from 0 to 100, with values below 30 indicating oversold conditions and above 70 indicating overbought conditions. While RSI is useful for screening stocks, it should not be solely relied upon for buy or sell decisions. The video also introduces the concept of divergence, where price and RSI move in opposite directions, potentially signaling a change in momentum.

What does the RSI indicate when its value is below 30?

• The stock is highly volatile

• The stock is oversold

• The stock is overbought

• The stock is at a fair value

What does an RSI value above 70 typically suggest?

• The stock is stable

• The stock is undervalued

• The stock is overbought

• The stock is oversold

On a price chart, what do the lines at 30 and 70 represent in RSI?

• Oversold and overbought conditions

• Support and resistance levels

• Entry and exit points

• Market trend lines

Why is RSI not a reliable tool for making buy or sell decisions?

• It only works for short-term trades

• It is only applicable to certain stocks

• It doesn't predict future price movements

• It requires a subscription

What are the possible outcomes if you sell a stock based on RSI?

• The stock price will definitely go up

• The stock price could go down, sideways, or up

• The stock price will remain unchanged

• The stock price will definitely go down

How can RSI be useful as a stock screener?

• By identifying stocks with high dividends

• By finding stocks that have pulled back

• By selecting stocks with low volatility

• By choosing stocks with high trading volume

What is a potential risk when using RSI to screen for oversold stocks?

• The stock will split

• The stock will become illiquid

• The stock will always increase in price

• The stock may never recover

What does divergence in RSI indicate?

• A guaranteed price reversal

• A potential change in momentum

• An increase in trading volume

• A stable market condition

When the price is increasing but RSI is decreasing, what is this an example of?

• Stability

• Divergence

• Convergence

• Volatility

What should you consider in addition to RSI when making trading decisions?

• Other technical indicators

• The stock's dividend yield

• The company's market cap

• The stock's historical price