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 China Automotive Systems Inc ( CAAS - Get Report) entered into oversold territory, hitting an RSI reading of 28.8, after changing hands as low as $5.21 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 36.8. A bullish investor could look at CAAS's 28.8 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 CAAS shares: Looking at the chart above, CAAS's low point in its 52 week range is $4.87 per share, with $8.97 as the 52 week high point — that compares with a last trade of $5.27.
More from Stocks
One of the Biggest Bears Not Encouraged by Fed Rate Cuts, Optimism
Watch the video above to see how to navigate a tricky market, according to a veteran stock trader.
Trade Desk Is Oversold but the Trend Is Still Pointed Down
Stocks can go down too fast but that does not necessarily make them a buy.
Jim Cramer: Costco's Downgrade Can Be Both Logical AND an Opportunity to Buy
I could list dozens of opportunities to buy high-quality stocks that are expensive. In each case it's easy to say what the Bernstein analyst said about Costco.