Investors will look at both fundamental and technical indicators to identify an oversold stock. Fundamental analysts will look at metrics such as a company’s price-to-earnings (P/E) ratio in comparison to other companies within that sector or industry. They will also look at earnings reports that help describe the inner workings of a company including a review of their balance sheet for capital flows and debt levels.
Negative News Events – This can include items such as a product recall or a lawsuit. For a biotech company, it can mean failing in a clinical trial.
Negative Economic Reports – Every month, investors get a series of economic reports that provide directional clues to the health of the overall economy. These include retail sales data, information on housing starts, the consumer price index (CPI) and the producer price index (PCI) which provide data on inflation, and the monthly jobs report.
Geopolitical Events - Wars, trade disputes, and issues such as financial sanctions or embargos can have an effect on individual stocks and/or entire sectors.
Earnings Reports – While these can technically be considered news events, earnings reports are generally seen as an event unto themselves. Companies go to great lengths to prepare analysts and investors for bad news, but are not always successful.
Change in Management – This can be bullish if a leader who is perceived to be ineffective is being replace. But if an effective leader is being replaced, it can cause investors to sell in expectation that the new leader will not be as effective in managing the company.