Overbought

AAA

DEFINITION of 'Overbought'

1. A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals.

2. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree - usually on high volume - that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback.

INVESTOPEDIA EXPLAINS 'Overbought'

1. An asset that has experienced sharp upward movements over a very short period of time is often deemed to be overbought. Determining the degree in which an asset is overbought is very subjective and can differ between investors.

2. Technicians use indicators such as the relative strength index, the stochastic oscillator or the money flow index to identify securities that are becoming overbought.

An overbought security is the opposite of one that is oversold.

RELATED TERMS
  1. Money Flow Index - MFI

    A momentum indicator that uses a stock’s price and volume to ...
  2. Price Persistence

    The tendency of a security's cost to continue moving in its present ...
  3. Relative Strength Index - RSI

    A technical momentum indicator that compares the magnitude of ...
  4. Stochastic Oscillator

    A technical momentum indicator that compares a security's closing ...
  5. Pullback

    A falling back of a price from its peak. This type of price movement ...
  6. Scale Out

    The process of selling portions of total held shares while the ...
Related Articles
  1. Confirming Price Movements With Volume ...
    Active Trading Fundamentals

    Confirming Price Movements With Volume ...

  2. The Basics Of Money Flow
    Technical Indicators

    The Basics Of Money Flow

  3. What Can Traders Learn From Investors?
    Options & Futures

    What Can Traders Learn From Investors?

  4. Find Forex Profit With The RSI Rollercoaster
    Forex Education

    Find Forex Profit With The RSI Rollercoaster

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center