In trading on Tuesday, shares of the SPDR S&P Pharmaceuticals ETF (XPH) entered into oversold territory, changing hands as low as $88.19 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In the case of SPDR S&P Pharmaceuticals, the RSI reading has hit 28.6 — by comparison, the RSI reading for the S&P 500 is currently 44.7.
A bullish investor could look at XPH's 28.6 reading as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
Looking at a chart of one year performance (below), XPH's low point in its 52 week range is $62.43 per share, with $102.80 as the 52 week high point — that compares with a last trade of $88.17. SPDR S&P Pharmaceuticals shares are currently trading off about 1.4% on the day.