[oh-ver-bahy] 
verb, -bought, -buy⋅ing.| 1. | to purchase in excessive quantities. |
| 2. | Finance. to buy on margin in excess of one's ability to provide added security in an emergency, as in a falling market. |
| 3. | to buy regardless of one's needs or financial means. |
| o·ver·bought (ō'vər-bôt') 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. |
| o·ver·buy (ō'vər-bī') v. o·ver·bought (-bôt'), o·ver·buy·ing, o·ver·buys v. tr.
To buy goods beyond one's means or needs. |
Overbought
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 Commentary
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
The Basics of Money Flow
Getting to Know Oscillators - Part 2: RSI
Introduction To Technical Analysis
See also: Money Flow Index - MFI, Oscillator, Oversold, Overvalued, Pullback, Relative Strength Index - RSI, Stochastic Oscillator, Technical Analysis, Technically Strong Market, Technically Weak Market
Also spelled: over bought, over-bought
overbought
vərˈbɔt