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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 ?
LONDON, Sha'ban 12, 1435, Jun 10, 2014, SPA -- European stocks paused early on Tuesday after a three-day winning streak fuelled by a package of measures from the European Central Bank, with a key regional index seen as overbought on a technical basis, Reuters reported.
However, the RSI is tagging lower highs in the overbought zone, indicating some weakness in the index.
This week the result of ECB session will be the most remarkable factor for the markets - in case the European bank does not justify hopes of the investors for any kind of stimulation measures that might trigger correction due to current conditions of markets being overbought.
Of the 10 major stocks overbought by foreign investors yesterday, financial stocks accounted for five.
However, the upper and lower lines (marking the overbought and oversold levels) are at the 80 and 20 levels.
The yield on the benchmark 10-year Japanese government bond closed slightly higher Monday as market participants saw bonds as overbought and were tentative ahead of a five-year bond auction later this week.
Well yes, it is possible, but the PSEi is nearing overbought levels in bought daily and weekly chart readings which means it may not have enough lasting power to keep it hoisted above this range unless a preparatory pattern (new wind up) can be made,' COL said in a research note.
Last week the Capesize Index was leaning towards a bearish technical from a momentum perspective, which was overbought whilst at the bear trend line.
Meanwhile, the RSI has begun to trend lower from the overbought zone, indicating that the market may witness some correction over the short-term.
The FTSEurofirst 300 index was also nearing "overbought" levels, with its Relative Strength Index (RSI) - a technical momentum indicator that determines overbought and oversold conditions - having hit 68.
First, the market still is overbought, which raises the possibility of downward correction.