Imagine an athlete running a 100-meter sprint. At the 50-meter mark, they are moving at maximum velocity. But by the 90-meter mark, their lungs are burning, and their speed is starting to drop, even though they are still moving forward.
The stock market is exactly the same. A stock can be moving up, but it might be “running out of breath.”
In first-principles terms, the RSI (Relative Strength Index) is a Velocity Meter.
It measures the speed and change of price movements. It tells you if the “energy” behind a move is increasing or if the stock is becoming “Overextended” and is likely to collapse soon. Let’s break down how to use this powerful tool on the NSE and BSE.
| : |
| Above 70 | Overbought | Be cautious; don’t enter new “Buy” positions here. |
| Below 30 | Oversold | Look for a reversal; the worst of the crash might be over. |
| Crossing Above 50| Bullish Momentum | The stock is gaining strength. |
| Divergence | Energy/Price Mismatch | The most powerful signal of a trend change. |
The “Smart Friend” Advice
RSI is a stamina meter, not a compass. It tells you *how hard* the stock is running, but it doesn’t tell you the *direction* of the long-term trend. Always look at the Moving Averages (C2 Pillar Moving Averages) to see the direction, and use the RSI to time your entry when the stock “takes a breath.”
Now that you can measure the stamina of a move, let’s learn how to draw the actual boundaries of the market.
Move to C2 Pillar 5: Support and Resistance: How to Draw Floors and Ceilings to master the geometry of the chart.