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® “Home-Study Course” Study Manual Page 22

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If we know how to listen to Price and Volume, the market will talk to us.
If we know how to listen, it will tell us when to enter trades and exit
trades. The market talks to us through Price Activity such as price
peaks and reversals which are all statements the market is making.
Market Volume represents another way the market talks to us. The key
is that they are statements of REALITY, not misleading information
such as bullish/bearish divergences or oversold and overbought
conditions.

Overbought And Oversold Conditions

The market itself is never overbought or oversold. Think about it.

Markets work to bring Price in line with Supply and Demand. Markets
are perfectly efficient. If supply always equals demand, then how can a
market be overbought or oversold? It may be expensive, but expensive
can be a relative term.

For example, suppose you purchased a painting by a currently
unknown artist/painter for $1,000. The next week your artist/painter
gets reviewed in a famous magazine and his work is now nationally
recognized, so your painting increases in value to $1,500. Some say that
your painting is too expensive or that prices are now OVERBOUGHT
because it went up in value too quickly in just one week.

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