Overbought

Overbought conditions occur when buying pressure has pushed prices to levels that may not be sustainable based on technical or fundamental factors. Common indicators for identifying overbought conditions include RSI above 70, Stochastic above 80, or prices far above moving averages. However, overbought doesn't necessarily mean prices will fall immediately—securities can remain overbought for extended periods during strong trends. Traders use overbought signals differently: trend traders might see them as strength, while mean reversion traders view them as selling opportunities. Context and confirmation from other indicators are crucial.