Using RSI to Identify Resistance: My PLTR Trade Example

Technical indicators are powerful tools for option traders, and among them, the Relative Strength Index (RSI) stands out when it comes to spotting overbought conditions and anticipating potential resistance levels. Recently, while monitoring Palantir Technologies Inc. (PLTR), I used RSI to successfully time an exit from a cash-secured put position and realized a profit of $230.

On April 23, 2025, PLTR’s price surged to $103.76, but more importantly, the RSI(6) spiked to 76, which signaled that the stock had entered an overbought zone. The RSI is a momentum oscillator that ranges from 0 to 100. Values above 70 generally suggest a stock is overbought, often indicating that it is near a short-term resistance or may soon undergo a pullback or consolidation. Recognizing this signal, I anticipated that PLTR was likely to face resistance and that the upward momentum could stall or reverse.

Based on this, I chose to buy back my sell put contract, locking in gains before the market corrected. The RSI gave me early warning signs before the price dropped slightly back to around $100.40. Without the RSI indicator, I might have waited too long, risking a reduction in the premium value or assignment at an unfavorable time.

This experience highlights a crucial lesson: RSI isn’t just a buy/sell indicator—it’s a risk management tool. When a stock’s RSI reaches 70 or higher, especially in a rapid rally, traders should consider taking profits or hedging positions. When combined with price action and volume, RSI can give us a high-probability signal for resistance and overextension. In this case, it helped me earn and protect profits effectively.