<2> Crude-oil futures haven’t been this overbought since 1990. That doesn’t mean the rally is over.
<3> Overbought but Not Over
The crude futures market has been on a tear, with prices surging to unprecedented levels. However, a key momentum indicator has reached its highest level in 36 years, sparking concerns that the rally may be due for a correction. But as the Wall Street saying goes, overbought doesn’t mean over.
<4> What is Overbought?
<5> Overbought is a term used in technical analysis to describe a market or asset that has risen too far, too fast. It is often indicated by a momentum indicator, such as the Relative Strength Index (RSI), which measures the speed and change of price movements. When the RSI reaches extreme levels, it can signal that the market is due for a pullback.
<6> The RSI is a popular momentum indicator that measures the magnitude of recent price changes to determine overbought or oversold conditions. The RSI is scaled from 0 to 100, with readings above 70 indicating overbought conditions and readings below 30 indicating oversold conditions.
<7> Crude Oil Futures