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Profiting From Elizabeth Warren Madness
When oversold the sellers of the stock (supply) have temporarily outnumbered buyers (demand). Obviously overbought is the opposite situation. The theory around these two terms is that at times the market will overreact in the short-term to some piece of news or even a rumor, driving the price past where it should go – in either direction. Here are the measures we use to find whether a stock has been overbought or oversold:
Relative Strength Index – RSI oscillates between 0 and 100 based on the speed of price movements. Over 70 is considered overbought and under 30 is considered oversold.
Bollinger Bands – Plots the mean price and two standard deviations below and above it over the period chosen. When the actual price is further than the two standard deviations away from the mean the security is considered overbought or oversold.
Full Stochastics – Shows the latest close relative to the high/low range over the periods chosen. 20 is considered oversold and 80 is considered overbought.
Unfortunately, as I’ve written ad infinitum, ‘How should I invest my 401k?’ is the most common question I am asked as soon as I identify myself as a former financial wunderkind and a current boring bank employee with an investing website. So I’ve spent a lot of time thinking about the pros and cons of 401k plans, which we will look at in this article.