Oversold Mean Reversion

Screening Filters

1. monthly_average_dollar_volume ≥ 50,000

   • Purpose: Ensure a minimum level of liquidity.
   • Rationale: For mean reversion trades, you want to be able to enter and exit positions without excessive slippage. A floor on dollar volume screens out extremely illiquid, thinly traded names that can be hard (or risky) to trade even if they look “oversold.”

2. volume {} (no constraint)

   • Purpose: Leave today’s raw volume unconstrained.
   • Rationale: Mean reversion setups can occur on both low and high volume days. By not adding a strict volume filter, the screener stays focused on the oversold/price-behavior criteria, while liquidity is already controlled by the dollar-volume filter above.

3. rsi_category ∈ {moderate, oversold}

   • Purpose: Find stocks that are technically weak, particularly those in or near oversold territory.
   • Rationale: RSI (Relative Strength Index) is a classic mean reversion indicator.
     • “Oversold” flags names where momentum has been strongly negative and may be stretched to the downside.
     • Including “moderate” captures names that are weak but not extremely oversold yet—often where mean reversion traders look for early entries as downside momentum slows.

4. week_price_change_pct ≤ -1%

   • Purpose: Require recent negative price performance over the last week.
   • Rationale: Mean reversion opportunities usually start with a pullback. By insisting on at least a -1% move over the past week, the screener focuses on stocks that have recently sold off, increasing the chance that any oversold RSI reading is tied to a real price decline rather than noise.

5. list_exchange ∈ {XNYS, XNAS, XASE}

   • Purpose: Limit results to major US stock exchanges (NYSE, NASDAQ, NYSE American).
   • Rationale: The question is explicitly about the US stock market. Restricting to these exchanges keeps the universe to widely followed US-listed stocks, generally with better transparency, liquidity, and data quality than OTC or foreign exchanges.

Why Results Match

• The RSI and weekly price-change filters directly target oversold conditions after a recent decline, which is exactly the setup mean reversion traders look for.
• The dollar-volume and exchange filters ensure these opportunities are in tradable, US-listed stocks, making them more practical to implement in real portfolios.