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What criteria do you use for the RSI?

By Matt McCallJul 12, 2017


One of my favorite and most important technical indicators is the relative strength index (RSI). You can check out my feature on the RSI to learn more about it, but the main criteria to focus on is the time setting. There are a few different time settings you can use with the RSI, and the industry standard is often a 14-day timeframe. However, my preference is the 9-day period setting, which takes the last nine trading days into consideration to determine the RSI number.

This is particularly helpful in identifying buy signals. The index is a scale of 1 to 100, and when the RSI moves out of oversold territory (0-30) and back into the neutral zone (30-70), it creates an RSI crossover buy signal. You may have heard me use this term before, and that’s because out of all the daily scans I run, the one that has produced the most winners has been the RSI crossover scan. By identifying stocks that have an RSI that is moving from oversold back into neutral, it will zero in on a chart that is starting to gain bullish momentum. In the last couple of weeks, the number of stocks generated each morning by the scan has moved from an average of about 50 to over 200. This is an indication that a large number of stocks have pulled back from a high and are once again attracting buyers.

Not all stocks from this scan will make our NexGen Buy List because they must also meet our other technical criteria such as price support and bullish volume.

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