KUALA LUMPUR, Feb 11 (Bernama) -- Bursa Malaysia ended higher today as buying on selected blue chips continued, said a brokerage. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 8.85 points or 0.51 per cent to 1,756.39 from Tuesday’s close of 1,747.54. The barometer index opened 3.69 points higher at 1,751.23 before moving as low as 1,745.51 in early trade to as high as 1,757.15 during the mid-afternoon session. Market breadth was positive with gainers leading losers 575 to 474, while 549 counters were unchanged, 1,087 untraded and 11 suspended. Turnover expanded to 2.55 billion units valued at RM3.06 billion from yesterday’s 2.19 billion units valued at RM2.35 billion.
Today, we are going to look at one of the technical indicator commonly used by financial analysts....RELATIVE STRENGTH INDEX (RSI)
Some people feel that technical indicator cannot be used alone while others follow the chart and pattern religiously.
Generally, Relative Strength Index (RSI) is a momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.
The formula is pretty easy for one to remember:
RSI = 100 - 100/(1+RS*),
where RS* = average of x days up of shares when market close/ average of x days down of shares when market close
The best way to look at the relative strength index is by plotting a graph....
As you can see, the RSI ranges from 0 to 100....an asset is generally deemed to be overbought when the RSI approaches the 70 level (overvalued) while when it dropped to 30, it is viewed as oversold and therefore undervalued.
It is important to take note that large surges and drops in the price of an asset will affect the RSI by creating false buy or sell signals. It is best to used the RSI indicator together with the fundamentals of a company, accompanied by other technical indicators as well....
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