ConnorsRSI is not like most technical indicators. What separates ConnorsRSI from stochastics, MACD or any other widely followed indicator is the fact that ConnorsRSI is backed by quantified data. Traders deciding whether or not to use ConnorsRSI can make their decision based on publicly available test results.
ConnorsRSI is a composite indicator consisting of three components. This indicator uses data regarding price momentum, the duration of the up/down trend and the relative magnitude of price change. With a single indicator combining three pieces of information, ConnorsRSI is capturing more information than we can with a one-dimensional indicator like the more familiar 2-period RSI, or RSI(2). While RSI(2) is a useful indicator, we know from quantified back-testing involving tens of thousands of trades that extreme values of ConnorsRSI are much more likely to predict a large price move than similar values of RSI(2).
Those test results are available in An Introduction to ConnorsRSI, 2nd Edition which can be downloaded for free here. That guidebook also includes the rules for a trading strategy based on ConnorsRSI along with proof that average 5-day returns of stocks rise after ConnorsRSI readings fall below 20. Lower readings are associated with higher average returns over the next five days. Heading into Wednesday’s trading there are thirteen stocks with ConnorsRSI readings below 10 and average daily volume of at least 250,000 shares, a volume that should ensure the stocks are liquid and tradable.
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Now let’s look at the most overbought and oversold stocks (according to ConnorsRSI) heading into trading for September 17, 2014. ConnorsRSI is a proprietary and quantified momentum oscillator developed by Connors Research that indicates the level to which a security is overbought (high values) or oversold (low values).
DORM (Dorman Products) is the most oversold equity with a ConnorsRSI reading of 1.30.
IFN (India Fund) is the most oversold non-leveraged ETF with a ConnorsRSI reading of 8.06.
SCO (ProShares UltraShort Bloomberg Crude Oil) is the most oversold leveraged ETF with a ConnorsRSI reading of 14.58.
VIMC (Vimicro International Corp) is the most overbought stock with a ConnorsRSI reading of 97.18.
EPU (iShares MSCI All Peru Capped) is the most overbought ETF with a ConnorsRSI reading of 86.34.
TradingMarkets Lists provide users pre-populated lists of stocks and ETFs identifying symbols with overbought and oversold ConnorsRSI and Bollinger Bands® readings. The Screener Lists are powered by The TradingMarkets Screener.
All data is as of the end of day on 9/16/2014.