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When applied to a market the term "oversold" means that the market is far from satisfied, and that there are fewer items for sale than buyers. For example, during various gift-giving holidays, stores are often oversold on some items because of missed projections of consumer demand. The result is not enough of the items to be sold to buyers, representing a missed opportunity for the sellers.

Sometimes a market will oscillate between overbought and oversold. This happens often in a stock market.

In a stock market, a stock is oversold when its selling price reaches a bottom indicating that sellers have been willing to sell, while the buyers have not been buying--thereby driving the price down.

At the bottom the stock is considered oversold, and buyer interest picks up as buyers to buy the stock at what they believe to be a bargain price. This typically continues, until the stock becomes overbought which starts a new trend of downward prices.

There are a variety of technical analysis indicators used by stock traders to identify oversold conditions.

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