Oversold Strategies

52 Week Lows

When an ETF puts in a 52 week low this means the price is the lowest it has ever been in the previous 52 weeks (or 252 trading days). This is the first trading strategy I tested using a scientific method. That is, I made trades, and logged all of the results into a spreadsheet.

ETFs at 52 week lows are generally extremely oversold. However they can of course go much lower.

Quality ETFs rarely make 52 week lows. If they do then that can mark an extremely interesting long term buying opportunity.

Does buying ETFs at 52 week lows work? In 2025 I bought 24 ETFs at 52 week lows. I ended up with a 87.5% win rate and an expectancy of 4.5%. The average CAGR of a trade was 25.2%. These are pretty decent metrics and generally much better than I experienced with trading individual stocks.

50 Day Lows

When an ETF reaches a 50 day low this means the price for the fund is the lowest it has ever been in the previous 50 days.

If you want to buy the highest quality ETFs on pullbacks, 50 day lows can be a really good signal to wait for. Many of the highest quality equity based funds almost never put in 52 week lows. So you could wait several years or even a decade for a really good chance to buy the ETF at an incredibly attractive valuation.

By contrast, 50 day lows occur much more frequently. I've personally bought a lot of super high quality funds at 50 day lows.

Does buying ETFs at 52 week lows work? In 2025 I bought 23 ETFs at 50 days lows. I ended up with a 91.3% win rate and an expectancy of 3.4%. The average CAGR of a trade was 14.9%.

Williams %R

Williams %R is a very common technical indicator. It is an oscillator that shows the current price in relation to the previous X number of prices. The usual number of X is 14. In the chart signals on this site the value of X is set to 70 days (i.e. 14 weeks). The buy signal is hit when the value of the Williams %R oscillator goes below -90 (negative 90).

Here's my overview of the Williams %R indicator:

Does buying ETFs when the weekly Williams oscillator suggests the fund is extremely oversold? In 2025 I bought 21 ETFs when the price fell below a Williams %R reading of -90. I ended up with a 95.2% win rate: only one trade was not exited for a profit. The loss was just 1.1% and this trade could eventually become profitable. Overall expectancy was a very respectable 4.7% and the CAGR was 34.8%.

Large Gap Down

This is a strategy I stumbled upon by accident. I was watching a YouTube video about an award winning trader. One of his entry strategies was to buy stocks when they gapped UP. I coded this strategy into my backtester and the results were poor. It was such a bad strategy when I tried it on my database of value stocks and ETFs!

Just for fun, I reversed the logic and set my backtester to buy stocks when they gapped DOWN. The results were amazing. The real life results with ETFs have also been impressive: 6 trades, 6 wins and 0 losses. Expectancy was 5.29% and the average CAGR 54.4%.

Here's my overview of how I use large gaps down in my trading:

This strategy taps into investor psychology. Stocks and funds usually gap down because there is bad news regarding the stock (e.g. a bad earnings report) or the market itself has a panic (think March 2020 or April 2025). When sellers panic there may be few buyers, so the stock almost always gets oversold to the downside. Eventually buyers will turn up, but they tend to make decisions more slowly than the panic sellers. So what often happens is a stock will go down a lot, and then it will bounce back up.

Large gaps generally occur more frequently in lower quality stocks and funds. If they occur in the highest quality large cap dividend stocks and ETFs then this often marks an incredible buying opportunity.

Be aware that large gaps down mean something has gone wrong and it's possible a fund will get even more oversold. But it is my experience that higher quality funds only tend to gap down big at the time of maximum pain.

A one size fits all approach is not always appropriate for this particular strategy. The size of the gap depends on a stock or fund's quality and volatility. After some extensive analysis of my stocks database I have determined that the optimum minimum size of a gap down for stocks is 4%. With the highest quality stocks and most equity based ETFs 3% is a good signal. For more precise results on particular instruments experimenting with standard deviations from the average gap size may yield good results. Again, my testing suggests that a minimum gap of 3-4% is a good baseline.

One final warning: even quality funds can make large gaps down if they're falling out of a bubble. These bubbles are usually due to stories that investors fall for. For example, the AI bubble, and the silver bubble of 2025-26. Be extremely wary of gaps down if a stock or fund is coming out of a bubble. These gaps can lead to significant drawdowns.

Rate of Change

I stumbled upon this strategy on a now mythical YouTube channel called seriousbacktester, and then coded it into my own backtester. This strategy looks for a period when the stock's price is more than two standard deviations from the mean, followed by a short period when the stock's momentum is positive.

The seriousbacktester YouTube channel is no longer available but I have recorded a video with my own research into this strategy:

What we're basically looking for is a large and sudden fall in a ETF's price, followed by a short period of consolidation. Once you've bought a few of these buy signals you'll learn to recognise the tell-tale chart pattern.

This strategy taps into investor psychology and attempts to identify the point at which bad news becomes less bad news and buyers start returning to the fund in question.

The indicator has an extremely good success rate on my backtests. In my live money testing it has a 100% success rate. Unfortunately there has only been a single buying opportunity, because it is not a commonly occurring signal.

Super Oversold

My autistic brain noticed that while setting stop losses, a drop of 20% from any of the other buy signals listed on this site often coincided with an area of strong support. This made me wonder if buying the stock or ETF at this level could be a good swing trading strategy.

This strategy has now been named the Super Oversold strategy. The best variants of Super Oversold are when a stock or ETF hits either a 52 week low or a Rate of Change buy signal (see above), and then falls another 20%. Now we are in extremely oversold territory here and the mathematical odds of the stock or ETF bouncing are too great to ignore.

Unfortunately at the time of writing there haven't been any ETFs producing Super Oversold buy signals. We're unlikely to see any until the next significant market correction. There have however been a number of individual stocks becoming Super Oversold. The initial results are encouraging but more testing is required.