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 Friday, shares of Westfield Financial Inc ( WFD) entered into oversold territory, hitting an RSI reading of 29.8, after changing hands as low as $7.47 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 41.4. A bullish investor could look at WFD's 29.8 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 WFD shares: Looking at the chart above, WFD's low point in its 52 week range is $7.06 per share, with $8.85 as the 52 week high point — that compares with a last trade of $7.48.
TheStreet’s Fundamentals of Investing Course will teach you the keys to making the right decisions in any market.
TheStreet’s Personal Finance Essentials Course will teach you money management basics and investing strategies to help you avoid major financial pitfalls.
TheStreet Courses offers dedicated classes designed to improve your investing skills, stock market knowledge and money management capabilities.
More from Stocks
Cboe: A Test Case in Discovering the Cost of Over-Enthusiasm
Let's use the history of Cboe Global Markets Inc. as an example of how to recognize overvaluation and trade out before major pullbacks, potentially side-stepping declines.
Dow Futures Flat, But Near Record; Investors Eye Retail Sales, Q2 Bank Earnings
U.S. equity futures were little-changed in early Tuesday trading as investors maintained their cautious stance on global stocks heading into the second quarter earnings season and keyed on June retail sales data for further clues on the direction of Federal Reserve interest rates.
Retail Sales, Bank Earnings, Libra, Debt and Transport - 5 Things You Must Know
June retail sales figures could add to deepening evidence of consumer strength, banks earnings will likely dictate Wall Street's early pace, Libra faces mounting scrutiny and JB Hunt earnings ease concern for a U.S. 'freight recession'.