RGinPG -- Please clear something up for me with regard to "overbought" signals.
I'm not an adept at TA. But it's my impression -- correct me if I am wrong -- that "overbought" and "overvalued" are two very different things. Suppose you have, say, a really beaten-down company, with a super-low peg ratio. Suddenly, it's "rediscovered," and its price shoots up for several days running. Technically, that might bring it into "overbought" territory (might it not?), but it's still a long way from being "overvalued."
So, what, actually, does "overbought" mean? Is it meant to reflect (possibly) a psychological reality: namely, that investors won't keep pouring money into the same stock for more than a certain period of time? That they'll "give it a rest," so to speak?
If so, then why sell the stock, if it is still "undervalued" (i.e., still "underbought" in the literal sense of that word)? If investors have any sense (a questionable proposition), they'll return to it after giving it a breather. Yes or no?
Thanks.
jbe |
