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Moderna and Solar Inc. are among the most overbought stocks following a record-breaking week.



As the stock market reaches record levels, investors may need to consider trimming positions in overbought names. The S & P 500, Dow Jones Industrial Average, and Nasdaq Composite all hit all-time highs this week. Despite this, fresh economic data that impacted Federal Reserve rate cut hopes caused the major averages to step back from their peak levels. Nvidia, however, experienced a surge to new heights following a successful earnings report. Some stocks have become overbought this week, as indicated by their 14-day relative strength index (RSI) being greater than 70. This may signal a risk of a pullback, as a high RSI tends to indicate overly optimistic investor sentiment in the short term. Conversely, a reading lower than 30 suggests that a stock is oversold and could be due for a short-term rebound.

Moderna emerged as the most overbought stock in the S & P 500 this week, with an RSI of about 86.5. Even though analysts maintain a consensus buy rating on the vaccine maker’s shares, they anticipate a potential drop of more than 18%. Moderna’s shares have surged nearly 68% this year, reaching a new 52-week high after a gain of over 25% this week. The stock received a boost from concerns surrounding instances of bird flu in humans in the U.S. and the possibility of a federal government vaccine program. First Solar, previously a struggling stock, has also entered overbought territory with an RSI of about 81.8. Analysts predict that the stock could lose around 11.4% from its latest close while maintaining a consensus buy rating. After UBS analysts highlighted First Solar’s position to benefit from rising electricity demand driven by artificial intelligence, shares soared more than 38% this week. Johnson Controls, known for its HVAC offerings and considered an AI play, also falls into the overbought category with an RSI of over 78.

On the other hand, some stocks have entered oversold territory, with Ulta being one of them with an RSI of about 25. Despite analysts holding a consensus buy rating on Ulta, they believe the stock has the potential to increase by more than 39% over the next year. Shares of Ulta have declined approximately 22.5% this year, prompting analysts from various firms to lower their price targets due to increased competition from brick-and-mortar retailers and a weaker U.S. beauty market. Other oversold stocks include SLB, J.B. Hunt, and Molson Coors. It is essential for investors to closely monitor overbought and oversold stocks to better manage risk and capitalize on potential market movements. In a volatile and constantly evolving market environment, staying informed and adaptable is crucial for successful investing.

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