Overbought and Oversold
Also called: overbought, oversold
Conditions where an oscillator says price has risen (overbought) or fallen (oversold) very fast — a stretched move that may pause or reverse.
Overbought and oversold are read from momentum oscillators: RSI above 70 or below 30, the stochastic above 80 or below 20, Williams %R above −20 or below −80. They describe the speed of a move, not a guarantee of reversal — a stretched stock can keep stretching.
The classic mistake is shorting 'overbought' or buying 'oversold' blindly. In a strong trend, oscillators can sit at an extreme for weeks. The conditions are most useful at support or resistance, with divergence, or as a filter for timing pullback entries with the trend.
On StockSetups
Because the RSI, stochastic, Williams %R and MFI on every StockSetups signal are screenable, you can build overbought/oversold filters — for example, pullback setups resetting from oversold within an uptrend.
Related terms
Get daily signals & real-time alerts.
StockSetups scans ~12,300 US stocks & ETFs after every close and sorts every long setup into four ranked lanes — each with a trade plan — plus an always-on engine firing 35+ real-time intraday alerts. Free for 7 days, cancel in one click.
Start free — 7-day full access →