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 Wednesday, shares of Stonegate Mortgage Corporation
(Symbol: SGM) entered into oversold territory, hitting an RSI
reading of 29.1, after changing hands as low as $13.56 per share.
By comparison, the current RSI reading of the S&P 500 ETF (
) is 64.8. A bullish investor could look at SGM's 29.1 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
Looking at the chart above, SGM's low point in its 52 week range is
$11.81 per share, with $18.94 as the 52 week high point - that
compares with a last trade of $13.59.
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