As Wall Street wraps up a strong first half, investors are reflecting on the market’s performance thus far. The S & P 500 has seen gains of roughly 15% in 2024, with the Dow Jones Industrial Average up 5% and the Nasdaq Composite leading the pack with a 20% gain. The rise of artificial intelligence technology has been a key driver of market gains, with companies like Nvidia and Microsoft benefiting from this trend.
When looking for potential pullbacks, investors often turn to overbought stocks. CNBC Pro recently screened the S & P 500 for overbought names based on their 14-day relative strength index (RSI). An RSI above 70 indicates overbought conditions, which could signal a downturn in the near term. Microsoft, with a 14-day RSI reading of 74, has emerged as one of the most overbought stocks. The tech giant has faced scrutiny from the European Union over antitrust concerns but has still seen significant gains in 2024.
In addition to Microsoft, other overbought stocks include Eli Lilly and FedEx. Eli Lilly, with a 14-day RSI of 83, has seen a substantial climb of nearly 57% in 2024. The company’s success has been driven by the popularity of GLP-1 drugs and the strength of its Alzheimer’s and diabetes treatments. FedEx, with a 14-day RSI of 77, has outperformed in 2024 thanks to strong financial results in the fourth quarter.
On the flip side, some stocks have entered oversold territory, signaling a potential rebound. Walgreens Boots Alliance and Waters Corporation are among the oversold names, with 14-day RSIs of 20 and 22 respectively. Walgreens, in particular, has faced challenges in its fiscal third quarter, leading to a decrease in full-year profit forecast. Despite these struggles, analysts see potential upside for the stock in the future.
Market Outlook
As investors navigate the ups and downs of the stock market, it’s essential to analyze both overbought and oversold stocks. While some companies may be due for a pullback after strong gains, others may present buying opportunities after recent declines. By staying informed and monitoring key indicators like the RSI, investors can make more informed decisions in a constantly evolving market landscape.