When a security is believed to be trading at a level above what it should be valued, it is referred to as “overbought.” A pre-assumption with overbought stocks is that the upward movement is a short-term phenomenon and that the market will correct the price in the near future. This makes an overbought security a solid sale. Determining if a stock is valued too highly can occur as a result of technical analysis of the securities price history. However, “overbought” is also a subjective term. Since traders, analysts, and investors use different tools and metrics, some may see a security as overbought while others argue it’s still on the way up.