Overbought and oversold
States in which an oscillator has passed conventional boundaries of its scale — the 30 and 70 levels of the relative strength index, for instance.
How to read the number
The words describe the position of the indicator, not a judgement about the security. They speak to how fast the price arrived at its current level and not to what that level is worth.
When the metric lies
Passing the boundary signifies strength of movement and can persist indefinitely. Reading it as an approaching reversal is the commonest error made with oscillators.
Also known as: oversold