I don`t care too much about OB/OS, i remember one sentence, "There is nothing like overbought/oversold", don`t know the source, but a serious trader....
and "trends are often go much further than anybody can imagine" or so...
The OS/OB thing is a subjectiv construction, a try to find some rules in all the random, by looking on charts it seems to work often, but by testing a real system you are faced with the reality. I even don`t like to trade in so called OS/OB daily levels, cause i found more erratic moves and sharp intradayreversals occurring, cause the higher emotional stress of traders and the OS/OB traders...
you can find rare conditions with high prob of return to the mean, but fading every socalled OS/OB situation does only work with very large stops and/or by adding to losers(need of deep pockets...)
May be OB/OS is working to some degree in the S&P, but not in many other markets, you get cooked in the german dax, which is much more trendy.
It`s more about predicting volatility. Volatility is much more predictable than price. And i definitely don`t want to trade after a large WideRange-Trend Bar like friday. The probability of a following rangeday(especially on monday) is very high, for me in the nearly sure area...this means lousy trends, narrow dayrange and you can probably sell breaks over openrange and buy breaks under....
