KUALA LUMPUR, Sept 28 (Bernama) -- Bursa Malaysia ended marginally lower on Monday amid selling activity as the market lacked fresh catalysts to spur investors’ buying interest, an analyst said. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 1.60 points, or 0.09 per cent, to 1,670.02, from Friday’s close of 1,671.62. The benchmark index, which opened 0.93 of-a-point higher at 1,672.55, moved between 1,668.61 and 1,674.11 throughout the trading session. Market breadth was negative as losers surpassed gainers 748 to 388, while 517 counters were unchanged, 1,271 untraded and 91 suspended. Turnover slipped to 3.11 billion units worth RM2.40 billion from 4.07 billion units valued at RM2.69 billion on Friday.
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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