As the market continues its record-breaking surge, several leading themes, including data storage, artificial intelligence, quantum computing, and defense, have propelled select stocks to remarkable highs. Yet, in the midst of this euphoric run, some names have become extremely overbought, flashing potential warning signs for near-term investors.
While markets can defy gravity for longer than most expect, even the strongest trends eventually cool off. One of the most reliable gauges for spotting potential overextensions is the Relative Strength Index (RSI). It’s a momentum indicator that helps identify overbought or oversold conditions. Typically, RSI readings above 70 suggest that a stock may be overbought, while readings in the 80s or 90s often precede short-term pullbacks or consolidations.
