Low RSI Stocks in NIFTY 50
In this blog, along with understanding the RSI indicator, we will also look at low RSI stocks in NIFTY 50. Above all, we will determine if a stock is overbought or oversold. We will be covering the following points in this article:
What is RSI?
The RSI was developed by an analyst named James Welles Wilder Jr. and introduced in his book 1978, “New Concepts in Technical Trading Systems.”
In simple terms, the RSI measures the recent performance of a given share/stock against its own price history performance by combining the average gain or loss of particular security owned over a predetermined period.
A stock is usually considered overbought when the RSI indicator reaches 70 or above and oversold when it falls below 30.
Whereas market analysts generally use RSI to measure the trading trends of a stock, the technical analysis tool is also used to measure the relative strength index of bonds, options, futures, commodities, and currencies.
Let’s now move into how to calculate the RSI of a stock.
If you already know how to find the RSI indicator values, jump to the low RSI stocks in NIFTY 50 here.
How to Calculate RSI of a Stock?
The formula to calculate the RSI indicator is mentioned below.
RSI = 100 – [100 / (1+ Average gain/Average loss)]
The average time period we use for the RSI is the 14-period average. Let’s say in the last 14 days, there were 34 up days and 23 down days. We’ll take the average gain of the 34 days and divide it by 14, then use the average loss of 23 days and divide it by 14. The RSI index assumes that bulls won on the day the stock closed green (closed up) and bearish when it closed down.
Take an example in order to understand this.
Assume that the stock trades on day 0 in 1999, taking into consideration the following data points:
Average Points Gained = 34/14 = 2.42
Average Points Lost = 23/14 = 1.64
Plugging in the value in RSI formula,
RSI = 100 – [100 / (1+ Average gain/Average loss)
= 100 – [100/ (1+ 2.42/1.64)]
= 100 – [100/ (1+ 1.47)]
= 100 – [100/2.47] = 100 – 40.48
RSI = 59.52
Now check the outcome if the stock is overbought or oversold:
- If the RSI is greater than 70, it will indicate that the stock is overbought.
- Whereas the RSI value is less than 30, it indicates that the stock has been oversold.
- A value of 80 or more is a strong indicator of an overbought condition. However, 20 and below is a strong indicator of an oversold condition.
Low RSI Stocks in NIFTY 50
Now, we have understood that stocks with less RSI are better for pick basis the above example. Hence, here is the list of best stocks with low RSI against the NIFTY 50 Index:
RSI and MACD are the two popular momentum indicators in the trading community. I hope you are aware of the MACD indicator strategy. If not then we are here to help, Check out the moving averages strategy. To understand this piece let’s check out the comparison between MACD and RSI indicators.
MACD vs RSI
Some traders, particularly beginners, tend to think that you need to choose between MACD and RSI technical indicators. There is no doubt that these two indicators are both reliable and accurate.
However, Traders and analysts will often use the RSI and MACD together to give them a better understanding of the market.
In general, if you are a trend trader, you can opt for MACD. And as a trend reversal trader, you may find the RSI a very helpful tool.
While RSI indicators consider the ratio of the gains and losses compared to the previous day, MACD is essentially a moving average of the price.
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