Oversold? Not yet.

by gbsmith4

Ironically, I find it slightly easier to spot “overbought” versus “oversold.”  As I noted previously, when I get giddy about my trading, the market is usually overbought.

But, how do I feel when the market is oversold?  That’s not easy to pin down.  I guess the closest I come is “nauseous.”  Of course, if I’ve been particularly nimble, I come into a down market relatively flat, so I end up kind of blank.

Therefore, to give me some sort of signal, I just look at individual stocks and start buying when they’re down about 10% from a recent peak.  Of course, the “10%” part is easy.  But, what’s a recent peak?  Generally a high within the past few weeks, but I’ll admit that’s more feel than anything.

Regardless of how I define “recent high” though, the stocks I’m looking at aren’t quite into buy territory.   But, they are getting close.