The importance of RSI as a Buy Sell Signal

 The markets give us multiple opportunities to buy and sell. How do we know when to buy and when to sell? Let us explore that.

There is a simple technical indicator available called RSI. Readings over 70 means markets or stocks are overbought and readings below 30 are an indication of markets or stocks being oversold and a time to buy.

Let us look at a couple of charts of Nifty on daily and weekly basis to illustrate this.

On the daily timeframe in the last 3 years, there have been at least 5 sell opportunities and 3 buy opportunities.

Let us look at the weekly chart below:

 

Here also, in last 10 years, at least 4 Sell and 3 buy opportunities have come. In Weekly RSI, these are opportunities for a bigger rally and the current opportunity is a similar one.

You can explore further using the below link:

https://stockcharts.com/sc3/ui/?s=%24NIFTY

Bottomline:

RSI is a very simple and powerful technical indicator to identify Buy and Sell opportunities. This is independent of the fundamentals and purely on Technicals.