The term can be applied subjectively, or in technical analysis there are various different indicators which technical analysts may use for (more or less) objective identification of oversold conditions.
over- +"Ž sold
oversold - Investment & Finance Definition
A market state that is determined by using technical analysis; an oversold condition exists when prices have declined too steeply and quickly compared to fundamental conditions. The next direction will be upward because everyone who wanted to sell already has done so.