RSI Past Can Turn RSI Into a Directional Tool

20 Sep 2022

The Relative Strength Index was created by J. Welles Wilder to measure overbought and oversold conditions. It’s also found popularity as an overall measure of direction because upward-trending stocks often hit overbought conditions. The opposite can be true with underperformers.

Today’s custom script, RSI Past, attempts to capture this secondary use of RSI as a directional indicator.

RSI Past achieves this by comparing how many bars have passed since RSI's most recent overbought and oversold readings. It then plots a simple difference between those two numbers.

Stocks with “bullish” signals will have positive readings that will increase each time RSI hits an overbought condition.

“Bearish” readings are just the opposite, growing more negative as oversold conditions occur.

An examination of some individual stocks may show the usefulness of this approach.

Meta Platforms, for example, hit an oversold condition almost exactly one year ago, and has remained under heavy selling pressure since:


Exxon Mobil, on the other hand, flipped to a bullish reading last October and has trended higher since:


This raises some interesting questions for Apple, shown on the main chart above. AAPL’s RSI Past has maintained a bullish reading for over a year -- unlike most other big technology stocks and the broader Nasdaq-100. Could this reflect bigger directional strength, especially with prices holding the $150 level that’s had relevance several times mid-2021?

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