To The Moon

RSI or relative strength index measures the speed and change of price movements in the underlying stock, we can use this to evaluate if the stock is overbought or oversold and aid us in our trading strategies

The values of RSI and what they mean

The RSI move between 0 and 100. Typically the RSI indicates that a stock is considered to be overbought when it is above 70 and oversold when it is below 30

This number is open to adjustment depending on each characteristic of each individual stock, if the RSI of a stock is repeatedly over 70 over let's say a week, we might want to adjust this to 80 as a resistance level

In a bull market, the RSI tends to remain in the 40 to 90 range however during a bear market the RSI will usually stays between the 10 to 60 range. 

If the underlying stock prices make a new high or low that isn't back by the RSI, this divergence can signal a price reversal. 

RSI of Tesla is currently below 20

The 14 day RSI of Tesla just hit below 20, the last time it hit this level was Feb 16 and may 19. This of course doesn't mean to say Tesla share price won't fall further given the current macro environment but current indicator clearly shows the stock in oversold territory, and a short term bottom is overdue. 

Conclusion

RSI is not conclusive or a definition of a reversal when it certain levels because a stock can be in the overbought and oversold teoritsrry for long or indefinite periods of time, therefore the time-line of a reversal can be unpredictable

Traders will also use RSI in conjunction with other indications such as MACD to get a clear picture of the short term movement of the stock . This is a different discussion which we will leave it for another day 

The above just a simple explanation of RSI, I am not an expert in technical analysis, however I do home some will find this article useful and hopefully I gave a correct explanation. 

Merry Christmas!

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