RSI Relative Strength Index Time Span

The RSI (Relative Strength Index) can be plotted for any time span, the default for most charting packages is 14-day time span selection.

The maximum divergence occurs when the moving average (MA) is exactly half the time span of the dominant cycle. In other words, if you make the assumption that the primary trend of the stock market revolves around the 4-year business cycle, an MA of 24 months will give you the greatest divergence between the high and low points of the cycle.

In the case of the 28-day cycle, 14 days is the correct choice, but it is important to understand that there are many other cycles apart from the lunar cycle. Working on this assumption, for example, would mean that a 14-hour RSI (Relative Strength Index) would be inappropriate if the dominant cycle was something other than 28 hours. The same would be true for weekly and monthly data.

In practice, a 14-day time span works quite well, but only for shorter peri­ods. I also use 9-, 25-, 30-, and 45-day spans. For weekly data, the calendar quarters operate effectively, so 13-,26-,39-, and 52-week spans are adopted. As for monthly charts, the same recommended spans for the ROC are also suitable for the RSI (Relative Strength Index), that is, 9, 12, 18, and 24 months.

For longer-term charts, covering perhaps 2 years of weekly data, a time span of about 8 weeks offers enough information to identify intermediate term turning points. A 26-week RSI (Relative Strength Index) results in a momentum series that oscillates in a narrower range, but nevertheless usually lends itself to trendline construction. Very long term charts, going back 10 to 20 years, seem to respond well to a 12-month time span. Crossovers of the 30 percent oversold and 70 percent overbought barriers provide a very good indication of major long-term buying and selling points. When the RSI (Relative Strength Index) pushes through these extremes and then crosses back toward the 50 level, it often warns of a reversal in the primary trend.

To isolate major buy candidates, it is important to remember that the best opportunities lie where long-term momentum, such as a 12-month RSI (Relative Strength Index), is oversold. If you can also identify an intermediate and a short-term oversold condition, all three trends, primary, intermediate-term, and short-term, are then in a classic conjunction to give a high-probability buy signal.