“Buy low and Sell high” is the basic concept of earning money by trading stocks. But how will we know the right time for the action? RSI indicator is a very good source of finding out the right time. Relative Strengh Index (RSI) is a technical momentum indicator to determine overbought or oversold conditions of stocks. RSI7 is based on 7 days period price actions and it is considered one of the early price movement indicators. With the daily , the weekly, and the monthly RSI7, you will be able to see and catch the possible lifetime opportunities. Also you can use additional technical indicators to confirm the strength of buy or sell signal.
When the daily, weekly, and monthly RSI values for a ticker go below 30, that represents an Accumulation Zone (or Over-sold condition) when you should watch the RSI movement closely for the Buy Alert. When the daily RSI7 rises above 30, that is considered a Buy Alert, as it is the possible sign that the equity was at a cyclical low and is starting to rise again. For the opposite reasons, when the daily, weekly, and monthly RSI values are above 70, then it is considered to be in a Distribution Zone (or Over-bought condition), where you should be watching for the Sell Alert. And a Sell Alert is when the daily RSI drops back below 70 , and possible opportunity for selling the equity.
Note that you should study the other technical indicators and fundamentals of the equity before making any financial decisions. RSI7 indicators usually work better with high-quality stocks (Mid to Large CAP equities). The low RSI for the small companies may be showing that it is actually heading towards bankruptcy , and not an opportunity to buy.
Here is my favorite RSI7 Buy Alert example. The product and market situation was not good for Apple Inc.(AAPL) during early 2012~ 2013 and investors were not sure the new CEO ,Tim Cook, will steer the vessel to the right direction. And the monthly and the weekly RSI7 were keep falling and finally they all three monthly, weekly and daily RSI7 fell below 30 and then after few days later daily RSI70 bounced back above 30 line and we had the Buy Signal on July 1st , 2013. And after that Applet kept going up steadily.
There are few things that we should note on the graph. You will need to check if the other technical indicators are confirming the signal too. At that time, MACD was also bouncing off and crossing over the signal line. Also MFI and CMF shows the same up trends. So I would say this was a pretty good Buy signal.
Check out the latest graph on AAPL.
So enjoy the website and let me know if you have any questions.