How RSI over 70 isn’t always oversold

RSI over 70
RSI over 70

So today I thought I would talk about one of the learnings I’ve encountered while trading shares.

Having read many many books about shares, especially charting books one thing each book seemed to concentrate one was to always tell me that once the RSI indicator had gone above the 70 mark it was considered oversold and potentially would be about to run out of steam and start to go back down.

If I’d of taken that thinking into account with this share IQE I’d of missed an opportunity to make the best run of the year so far.

Back in December last year I saw that IQE had already played with the 69 line, this is slightly better than the 70 line! Then as I watched the share hit a new high of 39p while also being over the 69 line. Other indicators where a factor but this was enough for me to go for a spread bet on this share. As you can see the RSI flew and came back to test the 69 line just twice in a 10 month period.

I hit a stop loss at £1.22 with a massive gain and all I did the whole time was watch the weekly RSI to make sure it didn’t drop below the 69 level.

If only they could all be like this!