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Overbought

A condition where an oscillator reads near the top of its scale, meaning price has risen quickly, not that it is due to fall.

Bearish divergence between price and RSIA price line whose second peak is higher than its first, drawn above an RSI panel whose second peak is lower than its first, with the two peaks joined by sloping dashed lines.PRICEhigher highRSI (14)70overbought30oversoldlower high
Divergence between price and RSI. RSI measures how one-sided recent price moves have been on a 0–100 scale. Here price sets a higher peak while RSI sets a lower one, so the second push carried less momentum than the first.

The word is badly chosen and causes more losses than almost any other term in technical analysis. An rsi above 70 does not mean too many people have bought; it means recent gains have outweighed recent losses by a wide margin.

In a strong trend, overbought is the normal state. RSI can hold above 70 for weeks, and the strongest stocks in a market spend most of their advance there. Selling every overbought reading means systematically selling strength.

The defensible uses are narrow: fading extremes inside an established trading-range, or noting that an oscillator failed to reach overbought on a new high, which is a divergence. Outside those contexts, treat the reading as a description of speed, not a signal.

Related: oversold, oscillator, rsi, rsi-range-shift, divergence

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