Rising prices attract optimism, positive news stories and bullish sentiment. Falling prices attract pessimism, negative news and bearish sentiment. The overbought or oversold areas are where you should consider taking profits, reducing your exposure by tightening your stops or hedging your position. Reactions are almost always reversed at the oversold line. Anticipation by eager traders to sell tops causes this formation.
Oscillators normally peak and bottom at roughly the same time as prices.
However, this is not always the case. Divergence is a conflict between momentum and price. When momentum indicators do not confirm the price action, beware. The prevailing trend may be about to reverse. Divergences in and of themselves do not signal that the trend has reversed.