InvestorQ : What are overbought and oversold zones and how can use these to take a view on the market?
Maniish Lofar made post

What are overbought and oversold zones and how can use these to take a view on the market?

Answer
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1 year ago


Focus on the overbought and the oversold zones. In technical analysis these are considered to be the trend reversers. For example, when the stock reaches the overbought zone then the uptrend gradually weakens and it is time to sell. On the other hand if the stock has reached an oversold zone then the downtrend is tapering and it is time to buy the stock. You normally use oscillators to identify overbought and oversold zones o the stock markets. These oscillators are useful in helping your understand how you must take a chart based decision on a fundamental pick.