When applied to a market the term "overbought" means that the market is satisfied, and that there are fewer buyers than sellers. For example, during Christmas-time in the United States, stores are often overbought on some toys because of missed projections of consumer demand. The result is a glut of toys which are sold off at a discounted price after the Christmas season.

Sometimes a market will oscillator between overbought and oversold. This happens often in a stock market.

In a stock market, a stock is overbought when its selling price reaches a peak and all warnings are to prepare for a drop in price, as owners of the stock begin to sell at the peak price.

This typically continues, until the stock becomes oversold which starts a new trend of upward prices.

There are a variety of technical analysis indicators used by stock traders to identify overbought conditions.

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