Oversold is a technical-analysis label for unusually strong recent downward price momentum according to an indicator’s rules. It suggests that selling-related price weakness has been pronounced, but does not establish that an asset is cheap or ready to recover.
What the reading measures
A common convention calls the Relative Strength Index, or RSI, oversold below 30 on its 0–100 scale. An RSI of 24 meets that convention; it is neither a 24% price decline nor a 24% probability of recovery. RSI compares recent upward and downward price changes, not the number of people buying and selling.
A typical setting uses 14 periods. Fourteen hourly candles and fourteen daily candles describe different windows, so an asset may appear oversold on one chart and not another. Other indicators and settings use different thresholds.
Weakness can continue
During a strong downtrend, oversold readings can persist while prices fall further. Fundamental problems may also worsen despite an extreme technical reading.
Traders sometimes look for improving price structure or a bullish divergence, where price makes a lower low while the indicator makes a higher low. These observations can inform analysis but do not guarantee a bottom. An oversold label alone does not make a purchase low-risk.