An RSI of under 30 on a daily chart is generally used to determine that an asset is oversold and indicates that the stock may soon bounce back from the oversold conditions. This screen highlights technically weak stocks (as determined by SwingTradeBot’s proprietary letter grade rankings) that are currently overbought and displaying bearish reversal signals. These setups may signal the end of a short-term bounce and a potential continuation of the broader downtrend. This screen highlights stocks with weak technical ratings (based on SwingTradeBot’s proprietary letter grade system) that are currently exhibiting an overbought Stochastic condition. These stocks may be experiencing short-term rallies within larger downtrends, and could be setting up for potential reversals or pullbacks.

Technical Signals – RSI Based

• When confirmed with other trading signals, an oversold stock can be a buying signal.
• It is unclear why the Fibonacci ratios are such a consistent predictor of stock price movement only that they are.
• Intrinsic value is a measurement of a company’s financial performance based on its cash flow.

An overbought reading doesn’t necessarily mean a stock will reverse immediately, but it does suggest that buying momentum may be extended. Traders can use this signal as a warning to tighten stops, consider profit-taking, or look for confirmation of a potential reversal. These levels will then be defined on a chart by horizontal lines that indicate potential areas of support and resistance.

Should Investors Use the Price-to-Earnings (P/E) Ratio in Determining an Oversold Stock?

A security that is selling near the low end of the lower Bollinger band and has a low RSI is usually considered oversold. Earnings Reports – While these can technically be considered news events, earnings reports are generally seen as an event unto themselves. Companies go to great lengths to prepare analysts and investors for bad news, but are not always successful. While an oversold Stochastic doesn’t guarantee a rally, it can be a useful tool for traders seeking low-risk entry points during pullbacks or after sharp declines. Like any index, the Relative Strength Index is only as good as its benchmarks.

Strong, Oversold and Reversal Signs – Bullish Reversal Setups in Strong Stocks

This screen identifies stocks where the Stochastic Oscillator (%K and %D lines) has fallen below 20 — a level commonly viewed as oversold. This suggests the stock is trading near the lower end of its recent price range and may be poised for a bounce or trend reversal. Candlestick Patterns – Displaying a daily chart using a candlestick pattern tells traders a story of price movement by both the shape and shading of the candle. Because they are useful in identifying potential changes in market direction, accurate interpretation of a candlestick pattern can provide confirmation for an RSI level.

overbought by Relative Strength Index (RSI)

A company’s price-to-earnings (P/E) ratio is a measure of how much it costs an investor to buy one dollar of a company’s profits. So a P/E of 25 means it will cost an investor $25 to buy one dollar of a company’s profits. Change in Management – This can be bullish if a leader who is perceived to be ineffective is being replace. But if an effective leader is being replaced, it can cause investors to sell in expectation that the new leader will not be as effective in managing the company. A common model used to calculate intrinsic value is the discounted cash flow formula. Enter your email address below to receive the latest headlines and analysts’ recommendations for your stocks with our free daily email newsletter.

Technical Signals – RSI Based

• Analysts seek to find the sweet spot between price (which is the dollar amount investors pay for a security) and value (what that security is actually worth).
• The added presence of bullish reversal signals—such as hammer candlesticks, bullish engulfing patterns, or MACD crossovers—helps validate the timing of potential entries.
• The companion to the MACD line is a signal line which is the 9-day EMA for the asset being used.
• This screen identifies stocks with strong overall technical ratings (based on SwingTradeBot’s proprietary letter grade system) that are currently showing an oversold Stochastic reading.
• Moving Average Convergence/Divergence Oscillator (MACD) – The moving average convergence/ divergence oscillator shows the relationship between two exponential moving averages (EMAs).

One of the most common indicators is the Relative Strength Index (RSI) which helps to show the momentum and volatility surrounding price movement. When the RSI is used with other technical indicators it can provide further confirmation of oversold conditions. The SwingTradeBot letter grades reflect a stock’s relative technical strength across multiple indicators and timeframes. By filtering for highly ranked stocks that are temporarily oversold, this scan helps traders uncover mean-reversion or bounce candidates within an otherwise strong trend.

This screen identifies stocks with strong overall technical ratings (based on SwingTradeBot’s proprietary letter grade system) that are currently showing an oversold Stochastic reading. These setups often highlight high-quality stocks experiencing short-term pullbacks, potentially offering attractive entry points for swing traders. This momentum-based indicator compares a stock’s closing price to its recent trading range and is often used to identify potential short-term turning points.

The Stochastic Oscillator is a widely used momentum indicator that measures a stock’s closing price relative to its recent trading range. A bullish crossover from oversold conditions often signals a potential trend reversal or bounce, making it valuable for swing traders and technical analysts. Investors will look at both fundamental and technical indicators to identify an oversold stock.

Strong, Oversold and Reversal Signs – Bullish Reversal Setups in Strong Stocks

An oversold reading reflects weakened downside momentum, which can precede a recovery, especially when supported by price action or volume confirmation. A list of stocks that are «overbought» according to the Relative Strength Index (RSI), which is an indicator often used in technical analysis. An RSI of over 70 on a daily chart is generally used to determine that an asset is overbought and indicates that the stock may soon reverse to the downside. Stocks that are fundamentally or technically strong but temporarily oversold can offer excellent mean-reversion or trend continuation opportunities. The added presence of bullish reversal signals—such as hammer candlesticks, bullish engulfing patterns, or MACD crossovers—helps validate the timing of potential entries.

For example commodities, such as gold and silver, don’t generate income so by cash flow models, they have no intrinsic value.

When a stock is in a downtrend, sellers will outnumber buyers meaning the index will show more lows than highs. RSI is expressed as a ratio of the average upward movement to the average downward movement of a stock over a specific period of time, typically 14 days. The RSI attempts to reveal how committed buyers and sellers are to their positions. An oversold stock is one that trades at a price that is lower than its perceived intrinsic value. By definition, an oversold stock is one that overbought and oversold stocks screener analysts believe has the potential to rise in price. A Stochastic Sell Signal helps traders anticipate short-term price drops and manage risk in overextended moves.

Rather it is a way for analysts to define the current state of supply and demand. Analysts seek to find the sweet spot between price (which is the dollar amount investors pay for a security) and value (what that security is actually worth). Enter your email address to see which stocks MarketBeat analysts think might become the next trillion dollar tech company. However, just because the RSI shows an oversold condition does not mean the stock is certain to rise in price.