The idea is simple: when a sto

The idea is simple: when a stock has run up too far, a pullback may be on the horizon. When it’s fallen too far, a bounce could be coming.

Technical analysts don’t use words like “expensive” or “cheap” though. Instead, they look for potential market imbalances — and that’s where the terms overbought and oversold come in.

How to Identify Overbought and Oversold Levels?

Many range-bound technical indicators can help spot these conditions. One of the most widely used is the Relative Strength Index (RSI).

The RSI is a momentum-based oscillator that measures the speed of price movements, fluctuating on a scale from 0 to 100.

An RSI above 70 traditionally signals an overbought condition — and a potential sell signal may emerge when it drops back below that level. On the flip side, an RSI below 30 typically points to an oversold condition, with a potential buy signal appearing when it climbs back above 30.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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