"What are overbought and oversold stocks? An overbought stock is one that has risen too much because of excessive buying and is probably ripe for a fall.An oversold asset is one that has fallen too much because of excessive selling and is probably ripe for a rise. What takes a stock to overbought/oversold levels? Traders often tend to overreact to news, earnings releases, rumours and other market-moving events and make abnormally heavy buying or selling, and this carries prices too far in a particular direction.What is the implication of overbought and oversold conditions? When the demand for the stock exceeds its supply, price moves up. The up move continues, the price rises too much and reaches the level beyond which the buyers are not prepared to buy but choose to book profit. A price pullback is likely. Likewise, when the supply of the stock exceeds the demand for it, the price falls. The downtrend continues and the price falls too much and reaches the level beyond which the sellers are not prepared to sell but choose to book profit. A price bounce is likely. What is this book going to do for you? Even when a stock has gone up too much, it does not mean that it has reached the peak and won't continue going up anymore. It may still continue the up move and become more overbought. Similarly, oversold condition does not mean that the downtrend is going to end soon. The stock may continue to fall many more days and become more oversold. We, therefore, have to identify the peaks of markets to go short and the bottoms of markets to go long to take advantage of reversals that occur after overbought/oversold conditions. The best way of identifying overbought and oversold conditions that lead to trend reversals is technical analysis. This book discusses a few of the most reliable technical indicators that help to identify and respond to trade signals at the right time especially in overbought and oversoldconditions and earn optimal profit."