RSI (Relative Strength Index)

The Relative Strength Index (RSI) is a momentum oscillator measuring the speed and change of price movements on a scale of 0 to 100. RSI above 70 indicates overbought conditions; below 30 indicates oversold conditions.

RSI tells you how aggressively a stock has been bought or sold relative to its recent history.

What this tells you

The relative strength index — a momentum oscillator scaled 0 to 100, comparing the size of recent gains to the size of recent losses over a chosen lookback window. Conventionally read as "overbought" above 70 and "oversold" below 30.

What it does not tell you

RSI is computed entirely from price. It knows nothing whatever about the business — not revenue, not earnings, not debt, not whether the company filed on time. "Overbought" is a description, not a prediction. Strong stocks can stay above 70 for months, and selling into that has been an expensive habit for a great many people. The reading also depends on the lookback you pick: change the window and you change the answer without changing anything about the security.

Further reading: Wikipedia