In trading on Tuesday, shares of the SPDR S&P Homebuilders ETF (Symbol: XHB) entered into oversold territory, changing hands as low as $33.44 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In the case of SPDR S&P Homebuilders, the RSI reading has hit 27.4 - by comparison, the RSI reading for the S&P 500 is currently 32.2. A bullish investor could look at XHB's 27.4 reading 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.
Looking at a chart of one year performance (below), XHB's low point in its 52 week range is $27.66 per share, with $39.22 as the 52 week high point - that compares with a last trade of $33.57. SPDR S&P Homebuilders shares are currently trading off about 2.6% on the day.