Overbought and oversold stocks
- what happens when a stock is oversold
- what to do when a stock is oversold
- what usually happens when a stock is oversold
- what happens when a stock is overbought
Overbought/oversold indicators...
Oversold stocks sometimes can provide a trigger to make a contrarian move, especially when the market is experiencing a downturn.
Overbought stock good or bad
However, it is worthwhile to consider all perspectives before you decide to buy stocks. In this article, we explain what oversold stocks are and how you can identify them.
Oversold Stocks Explained
An oversold stock is a stock that an investor believes has been heavily sold at too-low prices.
Excessive sales could result from negative reports like slowing sales, weak forecasts or unfavorable government policy.
When a stock is oversold in the market, traders may believe that the market is overreacting to news about the stock.
The situation could present an opportunity to take a contrarian stance on the stock.
Oversold vs. Overbought Stocks
Overbought stocks are stocks that have been bought heavily, sending their prices higher. Oversold stocks are stocks that are trading below the value that an investor believes is fair market value.
For example, let's say an executive of company XYZ is accused of a crime unrelated to the company.
- what happens when a share is overbought
- what to do when a stock is overbought