Keep an eye on National Grid this week as it heads towards 850p. Last year’s rally towards this level saw it become overbought, but the rise this year has been much more measured. Tesco and Morrisons continue to bounce around near 52-week lows and I see little reason for any rally in the short-term, while pessimism abounds regarding this sector.
*What is a relative strength index?
Relative strength index is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.
An asset is viewed as overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a candidate for a possible pullback. Conversely, if the RSI approaches 30, it is an indication that the asset may be oversold and may become undervalued.
**What is the significance of 52-week highs and lows?
One popular strategy is to buy when shares exceed 52-week highs and sell when they fall below 52-week lows.