Oversold Systems

Oversold strategies are quite popular among traders and there are various technical indicators that can be used to identify overbought and oversold levels. An oversold condition, however, can last for a long time, or the stock can become more oversold triggering a stop loss exit. It is therefore important to use other criteria as well to increase the probability of a rebound.

To take advantage of this important concept I have developed two daily and 1 weekly strategy to trade oversold stocks and a different strategy to trade ETF.

These strategies use, except for the classic oversold indicators, and other technical indicators such as money flow, relative strength and volatility in order to identify oversold stocks with a potential for a price bounce.

In the following example you can see that the OS system detected that APA was oversold 2 times during the last year.


Overbought in a Downtrend

This system will detect overbought stocks in a downtrend and tries to go short at the top (hopefully) to profit from the reversion to the previous trend. In the following example below the system detected that Meta Platforms (Facebook) was overbought in a downtrend 2 times during the last year.

This package includes 5 strategies: The OS Daily and OS Weekly systems, the OS in an Uptrend and the OB in a downtrend (short) and are available for the Amibroker and Metastock platforms.



chart formation systems

Test Parameters

Test date: November 11th, 2022
Commissions : 1 cent per share
Trade amount per stock: $15,000 with no margin or compounding.
Initial capital: $150,000