RSI Screener: How to Find Oversold and Overbought Stocks on NSE

The Relative Strength Index (RSI) is one of the most popular indicators among Indian traders — and for good reason. Developed by J. Welles Wilder in 1978, RSI measures the speed and magnitude of price movements on a scale of 0 to 100, helping you identify stocks that might be due for a reversal.

What Is RSI and How Does It Work?

RSI compares the magnitude of recent gains to recent losses over a specified period (typically 14 days). The result is a number between 0 and 100:

• RSI above 70: The stock is considered overbought. It has risen too fast and may pull back.
• RSI below 30: The stock is considered oversold. It has fallen too fast and may bounce.
• RSI between 40-60: Neutral zone, no strong signal in either direction.
• RSI above 60: Showing bullish momentum. The stock is in an uptrend.

RSI Screening Strategies for NSE Stocks

Strategy 1: Find Oversold Stocks (Mean Reversion)

This strategy looks for stocks that have been beaten down and might bounce back:

• RSI(14) daily < 30
• Close > SMA(200) daily (to ensure the long-term trend is still up)
• Volume > 3,00,000 (to ensure liquidity)

The logic: a fundamentally strong stock (above 200 SMA) that has temporarily dropped into oversold territory often presents a buying opportunity.

Strategy 2: Momentum Screening (Trend Following)

This strategy finds stocks with strong bullish momentum:

• RSI(14) daily > 60
• Close > EMA(20) daily
• Close > EMA(50) daily

The logic: stocks with RSI above 60 that are trading above both their 20 and 50-day EMAs are showing strong, confirmed momentum. Overbought does not always mean overpriced — in strong uptrends, RSI can stay above 60 for weeks.

Strategy 3: RSI Crossover (Timing)

This strategy catches the exact moment momentum shifts:

• RSI(14) daily crossed above 30 (recovering from oversold)
• Volume > 5,00,000

The logic: when RSI crosses above 30, it signals that selling pressure is easing and the stock may be starting a recovery. High volume confirms that the reversal has institutional participation.

Backtest Your RSI Strategy

Here is where most traders go wrong: they build an RSI screener, see a few matching stocks today, and start trading. They never check whether this approach has worked historically.

On BacktestKit, you can build any of the RSI strategies above and immediately backtest them. The backtest shows you how many stocks matched each day over the past months, and the advanced backtest simulates actual trades with entry prices, target prices, and success rates.

The key advantage: BacktestKit's backtest is accurate. If your RSI screener uses weekly timeframes alongside daily ones, BacktestKit shows you exactly what you would have seen on each day — not a retroactively recalculated version.

Tips for Using RSI Effectively

• Do not use RSI in isolation. Always combine RSI with at least one other indicator (like a moving average or volume condition) for confirmation.
• Adjust the period for your style. RSI(7) is more sensitive and works for short-term trades. RSI(14) is the standard. RSI(21) smooths out noise for longer-term positions.
• Overbought does not mean sell. In strong uptrends, stocks can remain overbought for extended periods. RSI above 70 in a strong uptrend is often a sign of strength, not weakness.
• Always backtest before trading. What works in theory may not work in practice. Use BacktestKit's backtest to validate your RSI strategy.

Frequently Asked Questions

What is the best RSI period for Indian stocks?

RSI(14) is the most widely used and tested period. For swing traders looking at NSE stocks, RSI(14) on daily charts provides a good balance between sensitivity and reliability. Experiment with RSI(7) for more signals or RSI(21) for fewer but more reliable signals.

Can I use RSI on weekly charts?

Yes, and it is very effective for medium-term investing. Weekly RSI below 30 on a stock with strong fundamentals can signal significant buying opportunities. On BacktestKit, you can set up weekly RSI conditions and backtest them accurately.