When a stock is oversold what does it means

When a stock is oversold, it means that the price of the stock has fallen significantly and is currently trading at a level that may be lower than its intrinsic value. This condition is often characterized by negative sentiment and heavy selling pressure, which can lead to a decrease in market activity and investor confidence. Oversold conditions can occur due to a variety of factors, including negative news, market volatility, or changes in investor sentiment. Technical indicators such as the Relative Strength Index (RSI) and stochastic oscillator are often used to identify oversold levels, with low RSI values (typically below 30) and low stochastic values (typically below 20) indicating oversold conditions. Oversold stocks are often considered to be undervalued and may present buying opportunities for investors who believe in the long-term potential of the company. However, it's important to note that oversold conditions do not guarantee a price rally and that further analysis of fundamental and technical factors is necessary before making investment decisions.