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CMA Final · Strategic Financial Management · Fundamental Analysis and Technical Analysis

Over the last 14 days, the total of average gains on up days was computed as an average gain of Rs 3 and an average loss of Rs 1.50 per day (both averaged over the 14-day period). Using Relative Strength Index, RSI = 100 − 100/(1 + RS) where RS = average gain ÷ average loss, what is the RSI?

The RSI is 66.67. Relative strength is the average gain of Rs 3 divided by the average loss of Rs 1.50, giving 2. Then RSI equals 100 minus 100 divided by 3, which is 66.67, indicating moderately strong momentum but below the usual overbought level of 70.

  1. A50.00
  2. B66.67Correct
  3. C33.33
  4. D75.00

Explanation

RS = 3 ÷ 1.5 = 2. RSI = 100 − 100/3 = 66.67. The value 33.33 arises from using the reciprocal RS of 0.5. The value 50 would require equal gains and losses.

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