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Related to Overbought: Overbought Oversold Indicator


Used in the context of general equities. Technically too high in price, and hence a technical correction is expected. See: Heavy. Antithesis of oversold.


In technical analysis, describing a security with too high a price. This means that the technical indicators on the security do not justify its current price. Technical analysts may recommend selling overbought securities, as they are due for a price correction. See also: Oversold.


Of, relating to, or being a stock market that has risen very rapidly in the recent past and is likely to suffer short-term price declines in the near future. Determining whether a market is overbought is difficult and is subject to individual interpretation.


When a stock or entire securities market rises so steeply in price that technical analysts think that buyers are unlikely to push the price up further, analysts consider it overbought. For these analysts, an overbought market is a warning sign that a correction -- or rapid price drop -- is likely to occur.

References in periodicals archive ?
Along with that the market still is overbought and that makes correction down highly possible.
As in that example, divergences that occur after an overbought or oversold reading usually provide more reliable signals.
The S&P 500 started to look overbought again after reaching two and a half year highs on Tuesday.
5400 (notice recently overbought and divergent RSI).
Prices of 10-year Japanese government bond futures ended the morning lower Wednesday as investors adjusted their overbought positions ahead of the half-year book-closings at the end of September.
This market is going to go from oversold to overbought very quickly,'' said Larry Rice, chief investment officer at Josephthal & Co.
The index is deemed to be overbought once the RSI approaches the 70 level, indicating that a correction is likely.
Dealers said investors were adjusting their overbought positions ahead of the half-year book-closings at the end of September.
He cautioned that ``both the stock and bond markets are getting very overbought,'' leaving them vulnerable to negative economic or earnings news.
I look if the stock is overbought, and if there are certain indicators in place that would point out that the stock is due for a correction or a permanent disregard.
Meanwhile, both the momentum indicators are mixed with the RSI consolidating in the overbought zone, while the MACD continues to move higher.