In trading on Tuesday, shares of the American Century Diversified Municipal Bond ETF (Symbol: TAXF) entered into oversold territory, changing hands as low as $48.9773 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.

In the case of American Century Diversified Municipal Bond, the RSI reading has hit 29.0 — by comparison, the RSI reading for the S&P 500 is currently 55.7. A bullish investor could look at TAXF's 29.0 reading as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.

Looking at a chart of one year performance (below), TAXF's low point in its 52 week range is $48.9773 per share, with $51.42 as the 52 week high point — that compares with a last trade of $49.00. American Century Diversified Municipal Bond shares are currently trading off about 0.1% on the day.

Find out what 9 other oversold stocks you need to know about »