Oversold stocks are securities that have dropped significantly in price and may be due for a bounce. Finding them at the right time is one of the most reliable strategies for swing traders and value-oriented investors. But most screeners make it harder than it needs to be.
In this guide, we'll walk through the most popular methods for identifying oversold stocks — from RSI to Bollinger Bands to multi-indicator setups — and show you how to screen for each one using plain English queries in Cotrader.
What Does "Oversold" Actually Mean?
A stock is considered oversold when its price has fallen rapidly and is trading below what technical indicators suggest is its fair short-term value. It doesn't mean the stock is cheap or guaranteed to bounce — it means selling pressure may be exhausted and a reversal is more likely.
Oversold conditions are identified using momentum indicators that measure the speed and magnitude of recent price moves. When these indicators reach extreme levels, they signal that the selloff may be overdone.
Method 1: RSI Below 30
The Relative Strength Index (RSI) is the most widely used oversold indicator. It measures the ratio of recent gains to recent losses on a scale of 0 to 100. The standard interpretation:
- Below 30 — Oversold. Selling pressure may be exhausted.
- Above 70 — Overbought. Buying pressure may be exhausted.
- Between 30-70 — Neutral range.
To find stocks with an oversold RSI in Cotrader, just type:
stocks where RSI is below 30
Run this screen →When RSI Works Best
RSI is most reliable in range-bound markets. In a strong downtrend, a stock can stay oversold for weeks. That's why experienced traders combine RSI with other filters to avoid catching falling knives.
Method 2: Price Below the Lower Bollinger Band
Bollinger Bands create an envelope around a stock's moving average based on its standard deviation. When price drops below the lower band, it means the stock is trading at an unusually low level relative to its recent history — a statistical oversold signal.
stocks where close is below the lower Bollinger Band
Run this screen →About 95% of price action stays within the bands, so a close below the lower band is relatively rare and often signals a short-term extreme.
Method 3: Combining Indicators for Higher Confidence
Single-indicator screens cast a wide net. For higher-confidence oversold signals, combine multiple indicators. Here are some powerful combinations:
RSI + Volume Spike
An oversold stock with a volume spike often signals capitulation — the final wave of panicked selling before a reversal. This is one of the strongest mean-reversion setups:
stocks where RSI is below 30 and volume is more than 2 times the 20-day average volume
Run this screen →RSI + Price Above 200 EMA
Want oversold stocks that are still in a long-term uptrend? Add a trend filter to avoid stocks that are oversold and in freefall:
stocks where RSI is below 30 and price is above the 200-day EMA
Run this screen →This finds stocks experiencing a temporary pullback within an established uptrend — a classic "buy the dip" setup.
RSI + Large Cap
Oversold penny stocks are risky. Large-cap stocks have more institutional support and are more likely to bounce:
stocks where RSI is below 30 and market cap is over 10 billion
Run this screen →Multiple Oversold Signals
When RSI and Bollinger Bands both signal oversold at the same time, the conviction is higher:
stocks where RSI is below 30 and close is below the lower Bollinger Band
Run this screen →Method 4: Sector-Specific Oversold Screens
Different sectors have different characteristics. Tech stocks tend to be more volatile, so an RSI of 28 might be less significant. Utilities rarely get oversold, so when they do, it's notable. Focus your screen on a specific sector:
technology stocks where RSI is below 30 and market cap is over 1 billion
Run this screen →healthcare stocks where RSI is below 25
Run this screen →Screening within a sector also helps you spot rotation opportunities — when an entire sector is oversold, it may be poised for a sector-wide recovery.
Avoiding False Oversold Signals
Not every oversold stock bounces. Here are the most common traps and how to avoid them:
- Falling knives — A stock can stay oversold for weeks during a genuine downtrend. Use a trend filter (e.g., price above 200 EMA) to screen these out.
- Low-volume stocks — Thinly traded stocks can show extreme indicator
readings on small moves. Add a minimum volume filter:
and average volume over 500000 - Earnings/news events — A stock that just reported terrible earnings may be oversold for a good reason. Always check fundamentals before acting on a technical signal.
- Penny stocks — Stocks under $1 are prone to manipulation and erratic
moves. Filter them out with
and price above 5
The Complete Oversold Screener Query
Here's a well-rounded oversold screen that combines everything we've discussed — oversold momentum, trend confirmation, liquidity, and size filters:
stocks where RSI is below 30 and price is above the 200-day EMA and market cap is over 1 billion and average volume is over 500000
Run this screen →This finds oversold large-cap stocks that are still in an uptrend with enough liquidity to trade comfortably. It's a strong starting point for a mean-reversion watchlist.
Next Steps
Once you've found oversold candidates, here's how to narrow your list:
- Check the chart for support levels and pattern context
- Look for reversal candlestick patterns (hammers, engulfing patterns)
- Confirm there's no pending earnings or other catalysts that could push the stock lower
- Set a stop-loss below recent lows to manage risk
For the full list of indicators and query syntax Cotrader supports, check out the Screening Guide. To learn more about combining multiple conditions, see How to Screen Stocks Using Plain English.