The Definition of 'Oversold'
- Technical analysis would describe the situation of being oversold through use of indicators, the most popular being oscillators. The most popular indicator for measuring whether an asset is oversold is a stochastic oscillator. The asset is considered to be oversold when the stochastic oscillator has reached it's lower levels, usually the 20th percentile (below 20). When the oscillator is at its lower levels, one may expect a price reversal soon.
- Oversold from a fundamental point of view is a situation when a particular asset has decreased in value groundlessly where the value of the asset does not reflect the available fundamental data.
Markets can remain irrational longer than you can remain solvent.