Legendary investor Warren Buffett advises to be fearful when others are greedy, and to be greedy when others are fearful. One way we can try to gauge the level of fear in a given stock is with 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 oversold if the RSI reading falls under 30
In trading on Monday, shares of Ecopetrol SA (Symbol: EC) entered oversold territory, hitting an RSI reading of 29.97, after changing hands as low as $10.70 per share. In comparison, the current RSI reading of the S&P 500 ETF (SPY) is 73.7. A bullish investor could view EC’s 29.97 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and start looking for entry point opportunities on the buy side. The chart below shows the one-year performance of EC shares:
Looking at the chart above, EC’s low point in its 52-week range is $8.59 per share, with $13.14 as the 52-week high point – that compares to a recent trade of $10.77.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.