– Glossary

Overbought

A technical condition that occurs when prices are considered too high and susceptible to a decline. Overbought conditions can be classified by analyzing the chart pattern or with indicators such as the Stochastic Oscillator and Relative Strength Index (RSI). A sharp advance from 1.2700 to 1.3200 in 2 weeks might lead a technician to believe that an instrument is overbought. Or an instrument is sometimes considered overbought when the Stochastic Oscillator exceeds 80 and when the Relative Strength Index (RSI) exceeds 70. It is important to keep in mind that overbought is not necessarily the same as being bearish. It merely infers that the instrument has risen too far too fast and might be due for a pullback.

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