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overbought
What does overbought mean?
An asset is overbought when it has risen sharply and, by momentum indicators like RSI above 70, may be overextended and vulnerable to a pullback. It suggests buying pressure has gotten ahead of itself.
"RSI hit 80, the stock is overbought and could cool off."
Origin
Technical-analysis term; the asset has been 'bought' beyond a sustainable level.
Frequently asked questions
What does overbought mean?
It describes an asset that has climbed so fast that momentum indicators, like an RSI above 70, suggest it's overextended and may be due for a pullback.
How do traders tell if a stock is overbought?
They often look at momentum gauges such as the Relative Strength Index (RSI); a reading above 70 is a common overbought threshold.
Does overbought mean you should sell?
Not necessarily. It flags that buying pressure has run ahead of itself and a pullback is possible, but overbought assets can keep rising.
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