There is a Wall Street momentum indicator that can help investors filter out the most overbought and the most sold stocks. The “Relative Strength Index” alerts investors to potential overbought and oversold conditions in the market by measuring the speed and magnitude of recent price movements. A stock is considered overbought if its 14-day RSI rises above 70. This indicates that it may be overstocked after a strong run, which means investors might want to reduce their exposure. Meanwhile, a stock with a 14-day RSI below 30 is considered oversold, meaning it may be time for investors to consider adding exposure to the name. A low RSI can indicate overly negative sentiment towards a stock and potentially signal a buying opportunity. While overbought stocks can always rise further, theoretically until their RSI hits 100, and oversold stocks can still fall further, theoretically all the way to zero, examining RSIs is still useful for investors looking to ease existing positions or to establish new ones. Stocks struggled last week, with the S&P 500 losing 0.3% and the Dow Jones Industrial Average dropping 0.1% for its third consecutive weekly decline. The pullback came as rates jumped on stubbornly high inflation data and the prospect of US monetary policy tightening. Still, some stocks may have exceeded the upside potential. CNBC Pro has picked the 10 most overbought stocks in the S&P 500. We also look at the percentage of analysts rating the stocks as long, their upside potential against their average price targets, and their performance in 2023. Catalent was one of the most overbought stocks. shares in the S&P 500. The pharmaceutical company has a 14-day RSI of 82.46. The stock jumped 58% in 2023, though it’s still down 27% in the past 12 months. Analysts on average see the stock rising 14%, according to FactSet data. Earlier this month, Bloomberg News reported that healthcare conglomerate Danaher expressed interest in buying Catalent. WW Grainger shares are also overbought. The industrial supply company has a 14-day RSI of 81.88. Besides that. The stock rose more than 21% to start 2023. Earlier in February, the company announced fourth-quarter results that beat analysts’ expectations. Still, analysts aren’t too fond of WW Grainger, with just 23.5% rating it a buy. GWW YTD mountain GWW in 2023, General Motors also made our list of overbought stocks, with a 14-day RSI of 76.25. The automaker’s stock started 2023 on the right foot, rallying 28.3%. The company’s fourth quarter results easily beat estimates. GM also announced that it had signed a deal with semiconductor maker GlobalFoundries, raising investors’ hopes that the company will escape the shortage of semiconductor chips plaguing other automakers. Earlier in the month, Goldman Sachs said General Motors was a promising stock, seeing its Cruise line as a technology leader. More than half of analysts covering GM rate it a buy, and the average price target implies a 10% upside. That said, based on its relative strength index, the stock might be overdue for a near-term pullback. CNBC Pro also looked for oversold stocks in the S&P 500. Electronic Arts was identified as one of the most oversold stocks. The digital entertainment company’s 14-day RSI came in at just 17.48. However, 50% of analysts covering EA consider it a buy. EA is off to a rocky start, down 9% this year. Late last month, EA reported disappointing quarterly revenue and cut its bookings outlook. Match Group has a 14-day ROI of 26.08. Shares of the online dating platform have fallen more than 61% in the past 12 months. However, 57.7% of analysts consider it a buy. They also see the stock climbing 42%, based on the analysts’ average price target. — CNBC’s Michael Bloom contributed to this report.
Wall Street’s most overbought stocks include General Motors and a pharma stock