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The term OVERBOUGHT means that the market has run out of buyers and OVERSOLD means that the market has run out of sellers. Users of these terms perceive that the market (stock, commodity, etc.) has reached an extreme limit in one direction or the other and that a retracement or consolidation is likely to take place.

The related terms of OVERVALUED and UNDERVALUED refer to market valuations. OVERVALUED means that the market is demanding too much of a premium to fair value. UNDERVALUED means that the stock (market, commodity, etc.) is selling at a discount to fair value.