Stock Screener: Oversold Stocks

While RSI can be helpful, it’s essential to look at it in the context of the broader market. For example, in a strong bull market, a stock might remain overbought for an extended period. Being overbought doesn’t necessarily mean the stock is due for an immediate correction, but it does suggest that the price may have gone too high, too quickly. Sometimes, positive news about a company—such as strong earnings, new product launches, or positive analyst reports—can spark a wave how to find oversold stocks of buying. Market-wide optimism, particularly during bullish phases, can also lead to an overbought stock market.

When using the MACD to identify oversold stocks, it is important to consider other factors, such as the overall trend, trading volume, and support levels. Placing the MACD within the broader context of technical and fundamental analysis can help provide a more comprehensive understanding of the stock’s potential direction. While identifying oversold stocks may seem straightforward, it requires a combination of technical analysis and fundamental understanding. Technical analysis involves studying the stock’s price movements and patterns using various indicators and charting techniques. Fundamental analysis, on the other hand, involves evaluating the company’s financial health, industry position, and growth prospects.

Ideal for traders looking to enter high-probability bullish trades during short-term weakness. Combine with support/resistance zones, candlestick confirmation, or volume analysis for stronger conviction. This screen highlights stocks generating a Stochastic Buy Signal, where the Stochastic Oscillator (%K) crosses above the %D line in the oversold zone — below the 20 level. Eastern, Louis is hosting a free live event where he’ll reveal his full strategy – including the names and tickers of his top-rated stock picks. His system is already flagging three new stocks he believes could double or even triple in the coming months. Using his proprietary Stock Grader system, honed over 47 years, Louis has uncovered 175 stocks that have soared 1,000% or more.

Therefore, traders often view RSI values below 30 as a sign to enter a long position or buy the stock, while RSI values above 70 may signal a potential exit or sell signal. Some may have underlying issues that prevent them from recovering, even in the long run. Therefore, it is crucial to conduct thorough research and analysis before making any investment decisions. A sudden increase in volume during a price decline may indicate that the selling pressure is subsiding and that the stock may soon rebound. Look for volume spikes that accompany price bottoms or signs of a reversal to confirm that the oversold stock is likely to recover.

• If the RSI falls below 30, the stock is considered oversold, suggesting it could be undervalued and due for a bounce.
• A stock can be said to be fundamentally oversold if it is trading below what investors feel is its fair value.
• An oversold stock is a stock that an investor believes has been heavily sold at too-low prices.
• This stock screen features stocks currently trading below their lower Bollinger Band — a condition that may signal strong bearish momentum or short-term oversold conditions.

Filter for Market Cap = Large and Mega Cap stocks.

• Oversold conditions driven by temporary market sentiment or rumors may present buying opportunities, as the stock price may not reflect the company’s true value.
• The MFI is calculated using a formula that takes into account the typical price, volume, and the ratio of positive and negative money flows over a specified period, typically 14 days.
• In addition, volume analysis can be used in conjunction with other technical indicators to validate oversold conditions.
• Often there is some overlap between the Snapback and Bollinger Bands strategies, because both aim to uncover oversold stocks with strong reversal potential.

The Moving Average Convergence Divergence (MACD) is another popular overbought and oversold indicator. Unlike the RSI, which focuses primarily on oversold vs overbought levels, MACD is more about trend strength and its direction. It shows the relationship between two moving averages of an asset’s price and can help identify potential shifts in momentum. RSI compares the magnitude of recent gains to recent losses to assess whether a stock is overbought or oversold.

Likewise, if the stock price moves toward the lower band, this is an indication that it is oversold. When a stock trades above 80 on the oscillator, it indicates that the stock is overbought. The relative strength index (RSI) measures the price movements of a stock on a scale of 0 to 100.

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Establish profit targets, maintain trailing stops, monitor fundamental factors, and pay attention to technical indicators for exit points. By combining technical and fundamental analysis, investors can enhance their ability to set appropriate entry and exit points and optimize their investment decisions. By analyzing earnings reports, balance sheets, and market news, investors can gain insights into a company’s intrinsic value and potential for recovery. Combining fundamental analysis with technical indicators provides a comprehensive view of the stock, enabling investors to make more informed investment decisions.

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The Stochastic Oscillator is a momentum-based indicator used to detect extremes in buying or selling pressure. An oversold reading reflects weakened downside momentum, which can precede a recovery, especially when supported by price action or volume confirmation. This setup is often used by mean-reversion traders looking for bounce opportunities, as well as by momentum traders identifying breakdowns.

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One crucial factor to keep in mind is that these conditions (overbought or oversold) are often driven by market overreactions and emotions such as greed, fear or fear of missing out (FOMO). When a stock is oversold in the market, traders may believe that the market is overreacting to news about the stock. The stock FR were oversold base on the stochastic indicator around May 21 and again near the end of July.

While there is no foolproof method, there are strategies and considerations that can help investors set effective entry and exit points. High-volume sell-offs can be an indication that a large number of investors are exiting their positions, resulting in a downward price movement. This scenario presents a potential opportunity for savvy investors, as the oversold condition may not be justified by the stock’s intrinsic value. In addition to oversold conditions, traders also analyze bullish or bearish divergences between the MFI and the stock’s price. For example, if the stock’s price is making lower lows while the MFI is making higher lows, it could signal a potential trend reversal and an oversold condition. Conversely, an RSI reading above 70 is considered an indication of overbought conditions, suggesting that the stock may be due for a price correction or pullback.

When a stock is oversold, it means that investor sentiment towards the company is negative, leading to an excessive decline in the stock price. It can arise from various factors, such as poor earnings reports, negative market sentiment, or broader economic concerns. Investors who can identify these oversold stocks have the potential to capitalize on the market’s overreaction and potentially profit from the stock’s rebound. While technical analysis can help identify oversold conditions, it’s essential to examine the fundamentals of the company. Even though the stock may be oversold based on price movements, it could be due to valid concerns about the company’s financial health or growth prospects.

To see how they work for yourself, consider following along in FXOpen’s free TickTrader trading platform to access a world of stock CFDs. For example, if Stock XYZ is trading at $10 and it falls below $6.18 (38.2%), then it is considered to be oversold. The Dow Theory of Retracement determines oversold or overbought conditions using Fibonacci retracement. The theory states that the price of an asset usually retraces 50% after an initial price movement takes place. Other times, lower stock prices may result from unfavorable economic conditions such as slowing sales, weak forecasts or lower product quality, causing investors to sell the stock.

It is crucial to assess the underlying reasons for the volume spike and consider the broader market context. Oversold stocks refer to stocks that are selling at a price level that is significantly lower than their fair value. This situation often occurs when there is a surge in selling pressure, causing the stock price to decline rapidly. Once a stock is oversold, you’ll want to look for signs that the stock is ready for a reversal. Reversal patterns, such as a double bottom or a bullish divergence, can indicate that the stock is about to bounce back from oversold levels. These patterns often precede a trend reversal and can be a good indicator that it’s time to buy.

However, investors should also be cautious of falling into value traps, where the stock may remain oversold due to significant underlying issues affecting the company’s prospects. Balance sheet analysis is an integral part of fundamental analysis when identifying oversold stocks. It involves examining the financial health of a company by assessing its assets, liabilities, and shareholders’ equity. This analysis provides insights into the company’s financial stability, liquidity, and potential for being oversold.