Overbought is a technical-analysis description of unusually strong recent upward price momentum relative to an indicator’s rules. It does not necessarily mean the asset is fundamentally overpriced or that its price must immediately fall.
Reading an indicator threshold
For the Relative Strength Index, or RSI, a reading above 70 is a common overbought threshold on its 0–100 scale. An RSI of 76 therefore falls in that conventional zone; it does not mean 76% of investors bought the asset or that a decline has a 76% probability.
The commonly used 14-period RSI refers to candles in the selected timeframe, so an hourly reading and a daily reading measure different windows. Settings and thresholds can vary, and other indicators have their own definitions.
Strong momentum can persist
An asset can stay overbought while continuing to rise during a strong trend. The label concerns recent price changes, whereas a valuation assessment examines fundamentals and assumptions about future value.
Traders may combine the reading with price structure, volume, or momentum divergence. None makes an immediate reversal certain. Selling or opening a short solely because an indicator enters the overbought zone can miss further gains or create losses as the price keeps rising.