Shares RSIs, highs and lows

Our regular look at shares trading at significant levels.

There has been little change on the overbought and oversold lists, as the relatively tight trading range for the FTSE 100 precludes any significant moves into or out of extreme RSI ranges. It is important to remember that shares can remain overbought or oversold for an extended period, and a simple RSI signal is not, by itself, a signal to open a trade.

For Provident Financial, it is worth nothing that we have been sharply overbought twice before this year, and each time we had a brief decline before the rally resumed. The same thing may occur this time round, and the share price certainly looks overextended at the present moment, being 8.7% above the 50-day moving average.

Relative Strength Index (RSI)*

Company

Share Price

Oversold

Company

Share Price

Overbought

Chemring Group 217.5 18.01 Salamander Energy 145.25 87.57
Balfour Beatty 223.1 21.39 BG Group 1276 86.02
CSR 545.5 24.67 InterContinental Hotels Group 2215 83.98
WS Atkins 1271 26.83 Provident Financial 2104 77.36
Serco Group 352.1 28.50 Premier Oil 348.3 76.64
Paragon Group of Cos 361.9 28.55 Royal Dutch Shell 2374.5 76.09
N Brown Group 464.3 28.88 Heritage Oil 314.8 74.54

 

The same companies continue to hover near their 52-week highs and lows, but National Grid is edging ever higher. If we do breach the long-term resistance around 850p this could be a signal of a further rally.

Highs/Lows**

Company

Share Price

% off 52-week high

Company

Share Price

% off 52-week low

National Grid 848 -0.18% Mothercare 164.25 1.55%
Royal Dutch Shell 2374.5 -0.27% Experian 1058 3.73%
AZ Electronic Materials SA 403.1 -0.47% Tesco 288.9 3.73%
InterContinental Hotels Group 2215 -0.76% Informa 487.3 4.68%
Heritage Oil

314.8

-0.98% Centrica 316.9 4.76%
Imperial Tobacco Group 2579 -1.00% Dairy Crest Group 467.9 4.89%
United Utilities Group 818 -1.09% International Public Partnerships 130 5.26%

 

*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.

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