What is Overbought and Oversold?
Overbought describes a security that has risen so quickly that some think it is due for a pullback. Oversold describes one that has fallen so far that some think it is due to bounce. Indicators like the RSI are used to flag these.
Why it matters
These are only signals, and a stock can stay overbought for a long time in a strong trend. Use them as context, not as a trading rule.