Momentumdraws in its own pane

Momentum on a 0–100 scale. Below 30 is conventionally called oversold, above 70 overbought — for a put seller, the oversold end is the interesting one.

On this chart: 14 periods, Wilder smoothing.

The Relative Strength Index compares the average size of recent up-moves against recent down-moves and maps the ratio onto 0–100. Wilder's own smoothing is used, which is slower than a plain EMA — the familiar 30/70 thresholds only mean what people think they mean with that smoothing in place.

A reading of 50 means up and down days have been roughly balanced. The further from 50, the more one-sided the recent tape.

Below 30 the stock has been sold hard and fast; above 70 it has been bought the same way. Neither is a signal by itself — strong trends can pin RSI at an extreme for weeks.

Divergence carries more information than level: price making a lower low while RSI makes a higher low says the selling is losing force even as the price falls.

Oversold readings describe the conditions where put premium is richest on quality names — fear is being priced. The entry-signal engine reads RSI as one of its factors for exactly this reason.

An overbought reading on a stock you hold describes conditions where covered-call premium is elevated and a strike above the recent range has extra cushion behind it.

Like everything in this guide, these are descriptions of conditions and reference levels — context for your own decisions, not instructions to trade.