Energy Recovery Enters Oversold Territory (ERII)

Legendary investor Warren Buffett advises to be fearful when others are greedy, and be greedy when others are fearful. One way we can try to measure the level of fear in a given stock is through a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.

In trading on Monday, shares of Energy Recovery Inc ( ERII) entered into oversold territory, hitting an RSI reading of 27.3, after changing hands as low as $4.08 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 33.3. A bullish investor could look at ERII's 27.3 RSI reading today 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. The chart below shows the one year performance of ERII shares:

Find out what 9 other oversold stocks you need to know about »

Energy Recovery Inc 1 Year Performance Chart

Looking at the chart above, ERII's low point in its 52 week range is $3.82 per share, with $7.75 as the 52 week high point — that compares with a last trade of $4.18.

According to the ETF Finder at ETF Channel, ERII makes up 2.79% of the First Trust ISE Water Index Fund ETF ( FIW) which is trading lower by about 0.4% on the day Monday.

If you liked this article you might like

Jim Cramer's 'Mad Money' Recap: Get Your Shopping List Ready for Next Week

The 'Bad News Is Good News' Reaction Isn't Working

Disinterest and Lethargy Are Guiding This Market

Selling Into Strength Can Be a Great Strategic Move

Selling Into Strength Can Be a Great Strategic Move

Why Energy Recovery (ERII) Stock Is Rallying Today