Used in the context of general equities. Technically too low in price, and hence a technical correction
is expected. Antithesis of overbought
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Of, relating to, or being a stock market that has declined rapidly and steeply in the recent past and is likely to exhibit short-term price increases in the near future. Determining whether a market is oversold is difficult and is subject to individual interpretation.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
A stock, a market sector, or an entire market may be described as oversold if it suddenly drops sharply in price, despite the fact that the country's economic outlook remains positive.
For technical analysts, an oversold market is poised for a price rise, since there would be few sellers left to push the price down further.