overbought

v.
Past tense and past participle of overbuy.

adj.
Characterized by excessively high prices owing to prior heavy buying and a concomitant rise in prices: an overbought stock market.

1. A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals.

2. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree - usually on high volume - that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback.

Investopedia Says:
1. An asset that has experienced sharp upward movements over a very short period of time is often deemed to be overbought. Determining the degree in which an asset is overbought is very subjective and can differ between investors.

2. Technicians use indicators such as the relative strength index, the stochastic oscillator or the money flow index to identify securities that are becoming overbought.

An overbought security is the opposite of one that is oversold.

Related Links:
Learn how this indicator uses both price and volume to record a more complete picture of price action. The Basics of Money Flow
Use this indicator to validate a change in price direction and moving averages. Volume Oscillator Confirms Price Movements
Spot extreme short-term price drops and profit on the rebound. Tales From The Trenches: A Simple Bollinger Band Strategy
Let's explain the confusion between relative strength and relative strength index, a frequently used technical analysis oscillator. Getting to Know Oscillators - Part 2: RSI
Discover tips from a long-term strategy that can help you make better short-term trades. What Can Traders Learn From Investors?

Description of a security or a market that has recently experienced an unexpectedly sharp price rise and is therefore vulnerable to a price drop, called a Correction by technical analysts, because there are few buyers left to drive up the price further. The opposite condition is oversold-when there are few sellers left and the price would be expected to rise.