Legendary investor Warren Buffett advises to be afraid when others are greedy and to be greedy when others are afraid. One way we can try to measure the level of fear in a given stock is by using a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale from zero to 100. A stock is considered as oversold if the RSI reading falls below 30.
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In trading on Tuesday, Wayfair shares entered oversold territory, hitting an RSI of 28.5, after changing hands as low as $ 268.65 per share. For comparison, the current RSI reading of the S&P 500 ETF (SPY) is 54.4. A bullish investor might view W’s 28.5 RSI reading today as a sign that the recent strong selloff is running out and start looking for entry point opportunities on the buy side. The graph below shows the one-year performance of W shares:
Looking at the chart above, W’s low point in its 52-week range is $ 144.51 per share, with $ 369 as a 52-week high – which compares to a last trade of 269.02 $. Find out about the 9 other oversold stocks you should be aware of »
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