Oscillators Technical indicators that give readings within a pre-defined range are called oscillators, and these work well in trading range periods. The reason oscillators such as RSI work well in trading range environments is that overbought situations are more likely to reverse lower and vice versa. If there is an underlying trend, oscillators that fight the trend will often be overpowered, making their signals useful only if they go with the trend. As with the stochastic indicator, RSI fluctuates between 0 and 100. RSI peaks indicate overbought levels and suggest price tops, while RSI troughs denote oversold levels and share price bottoms.
Absolute levels can vary in meaning from stock to stock and in different market environments.
These reference lines can be adjusted depending on the market environment. RSI can stay overbought in bull markets and oversold in bear markets for prolonged periods. RSI typically produces three kinds of trading signals, as outlined below in order of significance. You would enter a long position as soon as the RSI turns upward from this second bottom. Place a protective stop below the stock's latest minor low.