Relative Strength IndexThe Relative Strength Index (RSI) is a momentum indicator that assists in determining the underneath strength of a stock. In other words, it helps to measure the magnitude of recent change in prices to evaluate overbought and oversold conditions. This indicator was invented by J. Welles Wilder Jr., and over the decades, several analysts have acknowledged the significance of RSI in making sound investment decisions.
The indicator is plotted on 0 -100 scale, with value above 70 is considered as overbought and below 30 as oversold. As stocks enter overbought positions on RSI, the traders and investors intent to book profit or keep the required stop loss to minimize the risk. When the RSI rises above oversold region, stocks start giving positive signals.
At current levels, the Nifty 50 is testing the 12,000 mark and may remain range-bound till this consolidation phase is over. Here is the list of stocks in Nifty 500 that are trading in overbought zone and could see some correction in the days ahead.