How do I interpret a stock's relative strength index (RSI)?

@olen 

The relative strength index (RSI) is a technical indicator that measures the speed and change of price movements in a stock. It is used to identify overbought and oversold conditions of a stock, indicating potential trend reversals.

The RSI ranges from 0 to 100, with readings above 70 considered overbought and readings below 30 considered oversold. Here's how you can interpret the RSI:

1. Overbought conditions: When the RSI crosses above the 70 level, it suggests that the stock is overbought, meaning it has experienced a significant upward price movement and may be due for a correction or pullback. Traders often consider this a signal to sell or take profits.
2. Oversold conditions: When the RSI crosses below the 30 level, it indicates that the stock is oversold, meaning it has experienced a significant downward price movement and may be due for a rebound or rally. Traders often consider this a signal to buy or enter into a position.
3. Divergence: When the RSI shows a divergence from the price action, it can provide a potential signal of a trend reversal. For example, if the stock price is making lower lows while the RSI is making higher lows, it may suggest that the downtrend is losing momentum and a potential reversal could occur.
4. Trend confirmation: The RSI can also be used to confirm the strength of an existing trend. If the stock is in an uptrend and the RSI consistently stays above 50, it indicates a strong bullish trend. Conversely, if the stock is in a downtrend and the RSI consistently stays below 50, it indicates a strong bearish trend.

It is important to note that the RSI should not be used in isolation and should be considered alongside other technical indicators and fundamental analysis for a comprehensive understanding of a stock's potential future movements.