When applied to a market
the term "overbought" means that
the market is satisfied, and that there are fewer buyers
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
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.