When a security is thought to be trading above its inherent or fair value, it is said to be overbought. Overbought often refers to recent or short-term price movement in the security and expresses the belief that the market will soon correct the price. Technical analysis of the security's price history is frequently what leads to this assumption; however fundamental analysis can also be used and lead to this conclusion. An overbought stock can be a suitable candidate for selling.
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