The Relative Strength Index (RSI), a popular momentum oscillator, is extremely useful in the application of technical analysis. It is widely accepted that if the RSI rises above 30, it is considered bullish for the underlying stock. On the other hand, if the RSI falls below 70, it is a bearish signal. Some traders prefer to use the oscillator to identify entry points in long-term bullish trends.

The centerline for RSI is 50. In general, a reading above 50 indicates that average gains are higher than average losses and a reading below 50 indicates that losses are winning the battle. Some traders believe a move above 50 is bullish, while a move below 50 is bearish.

Many free charting services now offer traders the ability to add RSI to their charts. One of the easiest ways to compare RSI with the underlying stock is to pull up a chart at www.StockCharts.com. www.BigCharts.com also offers to show the indicator in the Advanced Chart section.

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