Articate

Any stock market trader or investor wants to find a list of oversold stocks because you can find some real bargains if you’re lucky. However it is not always that easy to come up with a list of oversold stocks if you scan through charts of all the various listed companies. That’s why it pays to use some kind of screener to help you with this task.

By using a screener you can have a list of oversold stocks in a matter of seconds. So you can then do further research of the companies that come up, and investigate which ones could be worth investing in.

Some people like to enter fundamental data into stock screeners, but unfortunately that will not help you to find oversold stocks. Instead you need to use some technical indicators such as the RSI, Stochastics and CCI indicators.

By using oscillating indicators such as these ones you can use a screener to help detect stocks which are below a certain level, ie indicating that they are oversold. So you could, for instance, choose to highlight every single stock where both the RSI and Stochastics are below 30, or 20 if you prefer.

Of course you shouldn’t necessarily buy every stock that comes up as oversold. You need to do plenty of research once you are presented with this list because there may be strong fundamental reasons why a company is trading so low. It may be struggling to generate as much profits as previous years and may be about to issue a profit warning, or it could be even worse with the company heading for bankruptcy.

The best opportunities generally occur when the wider stock market falls because then you get really strong companies being dragged down as well. So by using a stock screener at these opportune moments, you should find plenty of highly profitable companies that are growing their dividends and earnings every year, and are just trading at a temporary low in line with the market.

So overall I would say that stock screeners are invaluable tools for finding lists of oversold stocks to invest in, but they should only be used to filter out stocks that may be worth further investigation. You should never trade or invest in stocks that come up on these screeners without doing further research because if they are oversold because of the wider market, there is probably a good reason why they are oversold.