RSI Says “Overbought.” Does That Mean the Rally Is Over?State Street SPDR S&P 500 ETFBATS:SPYInvestradeRSI says “overbought.” Does that mean the rally is over? The word sounds like a warning to sell. On a chart, it needs more context. Investrade Chart Basics: today, we’re unpacking a commonly misunderstood indicator label. What RSI measures The Relative Strength Index, or RSI, measures momentum by comparing recent gains and losses. It runs from 0 to 100. Readings above 70 are traditionally called “overbought.” Readings below 30 are traditionally called “oversold.” Those labels describe momentum conditions. They don’t establish whether a security is fundamentally expensive or cheap. Why the distinction matters RSI can remain elevated during a strong upward trend, or depressed during a strong downward trend. Crossing a threshold doesn’t guarantee a reversal. Try it on the chart Add RSI with a 14-period length. Find a historical reading above 70 or below 30, then follow the next several candles. Did price reverse immediately, continue moving, or consolidate? Compare several examples before treating a threshold as a rule. Save this lesson for the next time an indicator label sounds more decisive than it really is. Next in Chart Basics: Bollinger Bands—and what narrowing bands can tell you. For educational purposes only. The security shown is an illustration, not a recommendation to buy or sell. Past performance does not guarantee future results. Investing involves risk, including loss of principal.