Usage of RSI

The usage of rsi is often misguided. Going over 70 is over bought and below 30 is over sold. However it is often above 70 or below 30 where the trend of the stocks is the strongest. It is not advisable to short above 70 or long below 30 just because text book says so.

If rsi is able to hit 80, the chances of another new high after rerrace ia very high, especially if it stays above 70 even during retrace. To maintain the trend it is important to maintain above 50 level.

The reverse is also true, once rsi breaks below 30 the chances of another low is higher. A more meaningful reversal can only happen when 50 is breached.