These overbought stocks could be due for a pause
Several tech heavy hitters could see a pullback after this week’s runup, if this technical indicator is any guide. Stocks have made a strong comeback since President Donald Trump’s early April tariff announcements triggered a sell-off. The reversal began after a temporary reduction in tariff rates for most countries was put in place. However, a solid earnings season and better-than-expected jobs data has also revived sentiment. All three major averages ended Friday notching their second straight winning week . Results from Microsoft and Meta Platforms notably revived investor confidence in the artificial intelligence trade , as the tech giants continued to spend on data center construction despite the potential of greater costs from tariffs. Using the CNBC Pro stock screener tool , we identified the most overbought and oversold stocks by weighing their 14-day relative strength index, or RSI. An RSI reading above 70 signals that a stock could be overbought and soon trade lower. An RSI below 30, on the other hand, indicates that a stock might be oversold and could see future gains. Microsoft made the cut as one of the most overbought stocks in the past week, having an RSI of 72.78. Analysts polled by LSEG have an average price target on the stock that indicates nearly 15% potential upside from Friday’s close. Shares of Microsoft jumped roughly 11% this week, taking the stock into the green for the year, after the company beat Wall Street’s estimates and issued a strong forecast. Revenue from its Azure unit also exceeded expectations, helped by demand for artificial intelligence services. Other tech companies, including Palantir , VeriSign and Netflix , are also overbought according to their RSI readings. Palantir has soared more than 64% this year, bucking the technology sector’s slower growth this year as the company’s revenues benefit from defense and software contracts with key U.S. government agencies. However, the average price target from analysts polled by LSEG indicates Palantir shares could tumble 27% . The stock has an RSI of 71.91, which also suggests some near-term pain could be ahead. Netflix and VeriSign, meanwhile, each have RSIs higher than 74. The stocks have also raced ahead of the broader market this year, gaining 29.8% and 37.3%, respectively. Netflix’s stock ended Friday with a record 11 straight days of gains, the company’s longest positive run ever as enthusiasm runs high after its recent earnings beat. Oversold stocks include UnitedHealth Group and Church & Dwight , which have RSIs of 25.11 and 27.78, respectively. UnitedHealth Group shares have plummeted since the health-care giant in mid-April slashed its annual profit forecast due to higher-than-expected medical costs. The stock is down nearly 21% this year.
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