Currently, 47.8% of companies in the S&P 500 are trading in overbought territory. Overbought levels are met when a stock's price moves more than one standard deviation above its 50-day moving average. As shown below, this many companies haven't been overbought (green line) since the market peaked back in early October. Likewise, the last time so few stocks were oversold was also early October.
Below we highlight stocks in the S&P 500 that are the most overbought. When individual stocks get this overheated, the risk/reward tradeoff begins to favor the risk side in the short term. As shown, ETN is the most overbought, trading 4.29 standard deviations above its 50-day moving average. ETN is followed by ALTR, GD, NSC and BLL. Other notables on the list include CAT, SLB, ORCL, HAL and DD.
Regardless of whether these overbought levels cause a pullback next week, after the declines that we've had since late 2007, it's a relief to know that stocks can in fact go up.
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