Momentum & Technical analysis

RSI in the stock market:
definition, calculation and signals

The RSI is the most widely used technical indicator for measuring the speed of a price move. It detects overbought and oversold zones, divergences and potential reversals — a valuable timing filter for European small caps.

Updated May 2026 8 min read Intermediate

What is the RSI?

The RSI (Relative Strength Index) is a technical oscillator created by J. Welles Wilder in 1978. It measures the speed and magnitude of price movements over a given period — by default 14 sessions — and oscillates between 0 and 100.

The core idea: when a stock rises too fast, too far, buyers run out of steam and a reversal becomes likely. When it falls excessively, sellers tire and a rebound becomes plausible. The RSI quantifies this state of market fatigue.

How is the RSI calculated?

RSI = 100 − 100 ÷ (1 + RS)
RS = average of gains over 14 days ÷ average of losses over 14 days (in absolute value)

In practice, you never have to calculate the RSI manually — every trading platform (TradingView, ProRealTime, eToro and most brokers) calculates it automatically. The standard parameter is RSI(14) — 14 daily periods.

Short vs long RSI: RSI(9) is more reactive but generates more false signals. RSI(21) is slower but more reliable on underlying trends. For European small caps with thin volume, RSI(14) remains the best compromise.

Overbought and oversold zones

RSIZoneInterpretationTypical action
> 80Extreme overboughtRapid, excessive rise — buyers exhaustedReduce or wait
70 – 80OverboughtCaution zone — strong trend but limited short-term upsideTighten stops
50 – 70Positive momentumHealthy uptrend — ideal entry zoneBuy possible
40 – 50NeutralWeak or sideways momentum — wait for confirmationObserve
30 – 40Moderate oversoldSelling pressure — a rebound is possibleWatch for a signal
< 30OversoldExcessive fall — rebound potential, but the trend is downWait for confirmation

Interpret your RSI in real time

What is your RSI?
55
Positive momentum
Healthy uptrend, with no overbought excess. Favourable entry zone if the fundamentals support the thesis.

RSI divergences — advanced signals

Divergence is the most powerful use of the RSI. It occurs when the price and the RSI move in opposite directions — signalling that the current trend is weakening.

↗ Bullish divergence
The price makes a new low, but the RSI makes a higher low. Signal: selling pressure is weakening despite the falling price. An upward reversal is likely.
↘ Bearish divergence
The price makes a new high, but the RSI makes a lower high. Signal: buying pressure is running out despite the rising price. A downward reversal is likely.

Divergences on small caps: divergences are more reliable at extreme RSI levels (overbought >70 for bearish, oversold <30 for bullish). Always confirm with a price signal (a reversal candle, a break of support/resistance) before acting.

RSI in the ML screener

The RSI(14) is integrated into the Momentum pillar of the Screener Small Caps composite score with a weight of 6 points out of 25. The scoring is as follows:

RSI(14)Momentum scoreInterpretation
50 – 656 / 6 ptsIdeal zone — uptrend without excess
40 – 50 or 65 – 753 / 6 ptsDecent momentum
< 30 or > 751 / 6 ptsOversold or overbought — degraded signal

RSI calculated daily on 800+ stocks

RSI(14) integrated into the Momentum pillar alongside relative performance, MA50/MA200 and volumes. 0-100 score updated every evening across Euronext Growth & Access.

Access the screener for free →

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Frequently asked questions about the RSI

The RSI (Relative Strength Index) is a technical oscillator that swings between 0 and 100. It measures the speed and magnitude of price changes over 14 days. Above 70: overbought (caution signal). Below 30: oversold (potential opportunity signal). Between 50 and 70: positive momentum — a favourable entry zone.
An RSI above 70 indicates the stock is in an overbought zone — it has risen quickly. It is a caution signal, not an automatic sell signal. In a strong uptrend, the RSI can stay above 70 for several weeks. The signal becomes more reliable when accompanied by a bearish divergence.
RSI = 100 − 100 ÷ (1 + RS) where RS = average of gains over 14 days ÷ average of losses over 14 days. In practice, platforms (TradingView, ProRealTime and most brokers) calculate the RSI automatically — add the RSI(14) indicator in one click.
An RSI divergence occurs when price and RSI move in opposite directions. Bullish divergence: the price makes a new low but the RSI makes a higher low — an upward reversal signal. Bearish divergence: the price makes a new high but the RSI makes a lower high — a sign that buyers are running out of steam.
The RSI is less reliable on low-volume small caps — a single large order can create a false signal. It remains useful as a secondary timing filter after a fundamental selection. In the screener, the RSI(14) is worth 6 points out of 25 in the Momentum pillar.