Oversold

Oversold is a term used in technical analysis to describe a condition where an asset is believed to be trading below its intrinsic value due to excessive selling pressure. Like overbought conditions, oversold conditions are often identified using indicators like the Relative Strength Index (RSI), where an RSI value below 30 typically signals that an asset may be oversold. When an asset is oversold, it suggests that the price may be due for a rebound or recovery, as the selling momentum might be overdone, and buyers may soon step in.

Traders often look for oversold conditions as potential buying opportunities, especially if they believe the asset’s fundamentals remain strong despite the recent price decline. An oversold signal can indicate that the market has overreacted to negative news or that the asset is undervalued relative to its long-term potential. By entering a position when an asset is oversold, traders aim to capitalize on a price reversal or bounce, potentially profiting from the recovery as market sentiment shifts.