When stocks get hammered hard enough, sometimes the selling goes too far. That's where the concept of "oversold" comes in, and right now, two materials sector companies are flashing signals that might interest contrarian investors looking for potential bargains.

The Relative Strength Index (RSI) is a momentum indicator that compares how a stock performs on up days versus down days. It's essentially a way to measure whether a stock has been beaten down too aggressively. When the RSI drops below 30, technical analysts typically consider an asset oversold, meaning it might be due for a bounce. Think of it as a rubber band stretched too far in one direction.

Here's a closer look at two materials stocks currently sitting near or below that 30 threshold.

Hongli Group Inc

Hongli Group Inc (HLP) has had a rough month, with shares tumbling around 46%. The company did manage to announce some potentially good news on Oct. 6, confirming it met Nasdaq's minimum bid price requirement. That's important because falling below that threshold can eventually lead to delisting, so staying compliant keeps the stock on the exchange.

Despite that compliance win, the stock has continued struggling and now trades near its 52-week low of $0.61. The current RSI sits at 24.9, well into oversold territory.

RSI Value: 24.9

HLP Price Action: Shares of Hongli Group dropped 5.4% to close at $0.73 on Thursday.

Origin Materials Inc

Origin Materials Inc (ORGN) has been on an even steeper decline, falling approximately 52% over the past month. The company reported quarterly results on Nov. 13 that showed some progress: losses narrowed to 11 cents per share compared to 26 cents per share in the year-ago period.

CEO and Co-Founder John Bissell struck an optimistic tone in the earnings release, saying: "Today, we are announcing financing that strengthens our balance sheet and provides access to additional capital that can be staged according to our manufacturing capacity build-out. This financing fuels the scale-up of PET cap production to serve forthcoming volume orders pursuant to customer qualification."

That financing announcement suggests the company is working to shore up its financial position and prepare for growth. Still, the market hasn't been impressed, and shares now sit near their 52-week low of $0.19.

RSI Value: 27

ORGN Price Action: Shares of Origin Materials fell 6.7% to close at $0.21 on Thursday.

What Oversold Really Means

It's worth remembering that oversold doesn't automatically mean "good buy." Stocks can stay oversold for extended periods, especially if there are fundamental problems with the business. The RSI is just one tool that can help identify when selling pressure might have gone too far, potentially creating opportunities for traders betting on a short-term rebound.

Both Hongli Group and Origin Materials are trading at penny stock levels with RSI readings suggesting exhausted selling. Whether that translates into actual upward momentum depends on whether buyers step in and whether the companies can deliver improving fundamentals going forward.