Overbought and Oversold

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Overbought and Oversold conditions are when the price of a security is unjustifiably high or unjustifiably low. Oscillators such as the RSI are typically used to identify these conditions.

Overbought

When an oscillator reaches its upper band it can be viewed as overbought. Price is unjustifiably high which may signal a reversal.

Oversold

When an oscillator reaches its lower band it can be viewed as oversold. Price is unjustifiably low which may signal a reversal.