NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
A stock's 14-day RSI is computed with average gain of 1.5 points and average loss of 0.5 points over the period. Using RSI = 100 - 100/(1+RS), what is the RSI?
The RSI is 75. Relative strength is average gain divided by average loss, 1.5/0.5 = 3. Plugging into the formula gives 100 minus 100/(1+3), which is 100 minus 25, equal to 75, indicating overbought-leaning conditions.
- A75Correct
- B60
- C66.7
- D80
Explanation
RS = 1.5/0.5 = 3. RSI = 100 - 100/(1+3) = 100 - 25 = 75. The value 66.7 results from using gain/(gain+loss) wrongly as 2/3 or using RS=2; 60 and 80 do not follow from the data.
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