RSI, moving averages, MACD, volume and volatility
- Interpret RSI, MACD and moving-average signals
- Use volume and volatility as context
- Avoid treating any indicator as a prediction
Moving-average crossovers
When a short moving average (say 20 days) crosses above a longer one (say 50 days), some traders read it as momentum turning up; a cross below as momentum turning down.
Crossovers lag by design: they confirm moves after they start, and in sideways markets they flip back and forth.
RSI
The Relative Strength Index (RSI) compares recent gains with recent losses on a 0 to 100 scale, usually over 14 days. Above 70 is often called overbought, below 30 oversold.
In strong trends RSI can stay above 70 or below 30 for weeks. ‘Overbought’ is not a sell signal by itself.
MACD
MACD (moving average convergence divergence) is the difference between a 12-day and 26-day exponential moving average. A 9-day average of MACD is the signal line. MACD crossing above its signal line is read as improving momentum.
Like other momentum tools, it is useful context and prone to false signals.
Volume and volatility as context
Volume tells you how many shares changed hands. Volatility measures, such as the average true range (ATR) or the standard deviation of returns, tell you how big normal moves are.
A 3% daily move means little for a stock that often moves 4%, but is notable for one that usually moves 0.5%.
How VEXA uses them
VEXA’s technical score combines several of these indicators with fixed, hand-chosen weights. It is a rules-based summary, not a trained prediction model, and the Indicator Library explains each input and its limits.
A stock has RSI 74, MACD above its signal line, and price 8% above its 50-day average on rising volume. All three describe strong recent momentum.
That describes the recent past accurately. It does not tell you tomorrow’s direction: strong momentum sometimes continues and sometimes reverses sharply.
Key terms
- RSI (Relative Strength Index)
- A 0–100 momentum indicator comparing recent gains with recent losses.
- Overbought / oversold
- RSI above 70 or below 30; descriptions of momentum, not signals on their own.
- MACD
- The difference between 12-day and 26-day exponential moving averages, used to gauge momentum.
- Signal line
- A 9-day average of MACD used to spot crossovers.
- Crossover
- When one line crosses another, such as a short moving average crossing a long one.
- Average true range (ATR)
- A measure of typical daily price range, used to gauge volatility.
- Momentum
- The tendency of recent price direction to persist for a while.
In Stock Analysis, turn on RSI and MACD for one stock. Write down what each currently says and one reason it could be wrong.
Key takeaways
- Indicators summarise recent price behaviour.
- Overbought and oversold are descriptions, not signals on their own.
- Crossovers lag and flip in sideways markets.
- Use volume and volatility to judge whether a move is unusual.