Oversold refers to a condition when an asset is massively sold by investors and traded below its actual value. Oversold is the opposite of overbought. However, determining whether an asset is in an oversold position tends to be subjective since each analyst uses different analysis tools.
An oversold occurrence has no known reversal period. However, many analysts will make predictions when reversal happens based on conditions that are met. In most cases, the reversal trend is based on “if” situations. For example, analysts predict a reversal trend will happen if an asset reaches its support level.
Common technical indicators used to identify oversold conditions are the Relative Strength Index (RSI) and Bollinger Bands. Besides technical indicators, oversold conditions can also be determined using fundamental analysis. The indicators used are current and past prices.
Find out other technical indicators used for technical analysis in the following article.