The Good News for China Is Hundreds of Stocks Oversold: Chart

The Chinese stock market’s 17 percent nosedive in 2016’s first eight trading days hasn’t been nearly as bad as last year’s biggest selloff in August, but by one measure, it’s worse. And that may be good news.

As of Wednesday’s close, 529 of the Shanghai Composite Index’s 1,122 member stocks have relative strength index values of less than 30, compared with 280 at the bottom of August’s rout. That velocity measure is used by technical analysts to determine if an equity is oversold. Stocks don’t usually stay in oversold territory long. Last year’s peak of 624 oversold stocks on July 8 fell to 16 within a week; by July 23, the market had risen 18 percent. That means many currently oversold stocks are probably due for a rebound.

(A previous version of this story corrected the number of companies with low RSI values in text and chart.)

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