NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
Which statement about the Relative Strength Index (RSI) is correct under the conventional interpretation?
Under the conventional interpretation, an RSI reading above 70 indicates an overbought condition. RSI is a momentum oscillator from 0 to 100 based on average gains and losses in closing prices, and readings below 30 are treated as oversold, not overbought.
- AA reading above 70 is generally treated as overboughtCorrect
- BA reading above 70 is generally treated as oversold
- CA reading of 50 signals the market is extremely overbought
- DRSI is plotted using only trading volume data
Explanation
RSI is a momentum oscillator ranging from 0 to 100 that is calculated from average gains and losses of closing prices. Readings above 70 are conventionally overbought and below 30 oversold. Volume is not used.
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