Relative Strength Index - RSI

How do you measure the strength of a stock? Try the relative strength index (RSI). Lots of charts and graphs. The price of a stock is graphed over a period of days, months, or years. Everything is put on a scale of 0–100, and analysts start paying attention when the stock prices go above the 70 mark or below the 30 mark. The idea is that too many peaks and valleys or lots of ups and downs...is bad news. As is the satisfaction gained from a Saturday night date. Everything is relative.

Well, the same is true in the stock market. And generally speaking, when viewing any given stock, its performance is mapped against the overall market. And for most Wall Streeters, the overall market is defined as the S&P 500, more or less.

So if the market was up 20% in a given period, and your stock was only up 10%...then, sadly for you, even though 10% in a short period of time is a nice gain, it was relatively…meh. Not so great. By the same token, if the market was down 20% in that same period, and your stock were only down 5, then woot squared for you: your stock was relatively strong.

And yeah, you want to know that a stock you own is reliably, steadily strong, and not all over the place. Extreme hills and valleys are great on a ski vacation. Investing in the stock market? Not so much.