The stock of The Goldman Sachs Group, Inc. (NYSE:GS) is consolidating Wednesday. This follows a decline of more than 20% that began in the middle of February.

There is a chance of a reversal and a move higher. The stock is extremely oversold. This is why our team of technical analysts has made it our Stock of the Day.

Most of the time a stock stays within its typical or usual trading range. If traders are aggressive and push the price above the range, the stock is considered to be ‘overbought'. If it is below the range, then it is considered to be ‘oversold'.

This is important.

Many trading strategies are based on the concept of reversion to the mean. If a stock is overbought, traders will enter the market as sellers because they will be anticipating a move lower. If the stock is oversold, they will anticipate a move higher and enter the market as buyers.

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There are many ways to determine if a stock is overbought or oversold. One of the most common is the Relative Strength Index (RSI). This is on the bottom part of the chart.

If the blue line crosses below the horizontal red line, it indicates oversold conditions. As you can see, this is the case now. This could draw in buyers who may end up pushing the price higher.

Some traders don't try to catch the exact top or exact bottom. They wait for a trend to develop and then jump in.

For Goldman, there is a good chance there will be resistance around the $558.00 level. If so, it could put a top on it. This means some will wait to see if this resistance breaks before they buy.

As you can see on the chart, this level had been support. Now that the price is lower, some who purchased shares at the support regret doing so. Many decide to eventually get out at breakeven if they can. So, if the stock rallies back to $558.00, they will place sell orders.

If there is a large amount of these sell orders, it could create resistance. But if this resistance breaks, there is a good chance Goldman will keep moving higher.

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