Relative strength index

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Relative strength index

Used in technical analysis, it is a measure of the number of days a stock increases in value relative to the number of days it decreases in value. The rule of thumb is that values over 70 suggest overvaluation and hence selling where as values around 30 suggest undervaluation or buying. Of course, this indicator completely ignores all fundamental information about the firm's prospects and, hence, is problematic to use as a stand-alone indicator for an investment strategy.

Relative Strength Index

A measure of the performance of a stock relative to its industry or the performance of an industry relative to the market as a whole. A stock (or industry) outperforming its industry (or market) for a given period of time has a relative strength index value above 1; this is seen as a bullish sign for that stock (or industry). On the other hand, a stock (or industry) underperforming its industry (or market) for a given period of time has a relative strength index value under 1; this is seen as a bearish sign.
References in periodicals archive ?
Relative strength indexes for Dubai and Abu Dhabi closed last week above 70, a level that signals to some analysts the markets gained too much, too fast.
Then they look at such parameters as commodity channel indexes, stochastics, moving averages, relative strength indexes and MACD values, to target the most promising individual issues.

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