NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
In technical analysis, what does the Relative Strength Index (RSI) primarily measure?
RSI measures the speed and magnitude of recent price changes by comparing average gains to average losses over a set period. It is bounded between 0 and 100 and is used to flag overbought or oversold conditions, conventionally above 70 and below 30.
- AThe speed and magnitude of recent price changes to judge overbought or oversold conditionsCorrect
- BThe ratio of a stock's price to its earnings per share
- CThe average volume traded over a fixed period
- DThe distance between the upper and lower Bollinger Bands
Explanation
RSI is a momentum oscillator that compares average gains with average losses over a look-back period, commonly 14 periods, and ranges between 0 and 100. Readings above 70 are conventionally treated as overbought and below 30 as oversold. Price-to-earnings is a valuation ratio, not an RSI input.
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