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In a nutshell, overbought means the stock prices increase, oversold means the stock prices decrease.  A reverse is possible when prices reach these extreme levels.  You can use the RSI = Relative Strength Index to confirm a reversal.

OVERBOUGHT

Overbought describes where a stock’s price increases, as there is a limited amount of stock available and there are more buyers than sellers.

OVERSOLD

Oversold describes a period of time where there has been a consistent downward movement in the price of stock over a period of time where you have more sellers than buyers and the price of the stock decreases.