Overbought/Oversold Conditions

Overbought and oversold are terms used in technical analysis to describe situations where the price of an asset is considered to be too high or too low, respectively, and is likely to reverse.

• Overbought: An asset is considered overbought when its price has risen sharply and is expected to pull back. This is often indicated by oscillators like the RSI or CCI reaching a high level (e.g., above 70 for RSI or +100 for CCI).
• Oversold: An asset is considered oversold when its price has fallen sharply and is expected to bounce back. This is often indicated by oscillators reaching a low level (e.g., below 30 for RSI or -100 for CCI).

It is important to note that an asset can remain in an overbought or oversold condition for a long time during strong trends.