Let's talk about RSI- This is an article from David Keller of Stockcharts.com....He is a true professional...I think he knows what he is talking about. There are a lot of amateur traders that play it wrong with the RSI and some only play charts...Amatuers playing simple RSI need to read this.
VNUE has changed FUNDAMENTALLY A FEW WEEKS AGO WITH THE BETA LAUNCH & SOUNDSTR DEPLOYMENT.. So, what that means all the prior data that makes up the moving daily averages really is lagging behind with this fundamental material news... I believe a lot of amateur traders or traders that DONT EVEN FOLLOW FUNDAMENTALS/COMPANY buy or sell on a simple amateur RSI interpretation.
Bad Overbought Or Good Overbought?
David Keller | February 06, 2019 at 02:33 PM
Question: When can “overbought” be a good thing?
Answer: When something becomes really overbought.
Allow me to explain. The Relative Strength Index (RSI) is one of the most common ways to measure price momentum, ranging from 0 to 100. When the RSI becomes overbought, the price has risen too high too quickly, generally leading to a downside correction. When the RSI becomes oversold, the price has dropped too low too quickly and you’d expect an upside rally to compensate.
That’s the simple interpretation, anyway. A deeper look into RSI shows that it is a rich measure of relative momentum that can put any price move into proper context.
First off, it’s worth remembering that the “relative” in the name is a bit of a misnomer, as the RSI compares the current price relative not to other assets but to the security's own price data, measuring the average up day vs. the average down day over a certain period of time. That is to say, when a certain stock closes higher on the day, how much higher has it gone? On down days, how much lower does the stock tend to go? In this manner, the RSI shows the most recent price movements relative to the “average” price movements for that specific security.
One of the worst “rookie mistakes” of technical analysts is to think of overbought as bad and oversold as good. When a stock is overbought with an RSI above 70, all that means is that the price has gone up a lot - that’s it. On its own, this doesn’t suggest negativity, but tells you the uptrend has been strong. The real signal is when the RSI exits the overbought region, which suggests that the upside momentum has been alleviated and that we’re now in a corrective pattern.
So can an RSI overbought condition ever be a good thing? Absolutely! When the RSI is “extremely overbought” with a value above 80, the upside momentum has become so great that the price will likely continue in the direction of the primary trend.
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