Spotting oversold cryptocurrencies with trend reversal indicators can be a valuable buying signal for cryptocurrency investors using technical analysis.
Essentially, an oversold buy signal appears for an asset that shows extreme weakness with the Relative Strength Index (RSI) on longer time frames. While at the same time, having a divergence on lower time frames suggests a trend reversal.
This happens because the market moves in volatile cycles. Therefore, any movement will inevitably face a correction in the opposite direction.
Seeking insights, Finbold pulled data from CoinGlass’ RSI heat map, identifying the only two tokens currently oversold.
Jupiter (JUP): Oversold in the 24-hour RSI
First, Jupiter (JUP) suffered consecutive sell-offs, causing its 24-hour RSI to drop to the oversold zone at 29.92 points. However, the lower three timeframes suggest strong momentum, which could cause a reversal.
JUP is trading at $0.477, up 3% on the day. Notably, Finbold presented this token as a cryptocurrency to avoid being traded on February 2nd in anticipation of a sell-off due to its massive airdrop.
Ark (ARK): Oversold in the weekly RSI
Ark (ARK) becomes the only oversold cryptocurrency in the weekly period. Interestingly, we can see the dotted lines in the chart indicating cryptocurrencies that have quickly changed their RSI from oversold to strong.
Notably, ARK has a 7-day RSI of 24.88. The buy signal takes shape with the 24-hour RSI moving towards neutrality at 43 points. The Ark token has lost 10.95% over the past week, trading at $0.848.
However, having an oversold RSI status does not guarantee price recovery. The cryptocurrency market is highly volatile and everything can change in the blink of an eye.
In this context, projects experiencing problems, disruptions or massive dumping can also exhibit an oversold state and continue in a bearish trend. Therefore, investors need to be cautious and understand what they are buying.
Disclaimer: The content of this site should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk.
