1, A term used to describe a technical opinion of a market has declined too steeply and too fast in relation to underlying fundamental factors.
2, A technical condition that occurs when prices are considered too low and ripe for a rally. Oversold conditions can be classified by analyzing the chart pattern or with indicators such as the Stochastic Oscillator and Relative Strength Index (RSI). A sharp decline from 1.3200 to 1.2700 in 2 weeks might lead a technician to believe that an instrument is oversold. Or an instrument is sometimes considered oversold when the Stochastic Oscillator is less than 20 and when the Relative Strength Index (RSI) is less than 30. It is important to keep in mind that oversold is not necessarily the same as being bullish. It merely infers that the security has fallen too far too fast and may be due for a reaction rally.