Market Dynamics This Week: A Mixed Bag
Some stocks that have been hoarded might experience pressure in the near future, particularly after a remarkable week on Wall Street. The S&P 500 hit a new all-time high on Friday as traders began to reduce their positions following a lack of formidable employment reports in August. However, this enthusiasm faded, causing the benchmark to turn and close the day on a down note. Despite this, the S&P 500 still managed a modest gain for the week, sitting roughly 1% below its peak.
While the major indices are nearing record levels, specific individual stocks appear to have been excessively bought up, rendering them susceptible to decline. CNBC Pro sifted through LSEG data to identify these over-purchased stocks using the 14-day relative strength index (RSI). Generally, a stock with an RSI above 70 is seen as overbought, while readings falling below 30 suggest it might be oversold—potentially leading to rebounds.
This week, Alphabet’s stocks surged over 9%, pushing its 14-day RSI to 84.1. This spike was largely influenced by a favorable ruling in its antitrust case with the U.S. Department of Justice, which boosted the company’s market valuation by more than $230 billion. A federal judge’s decision allowed Google to retain its Chrome browser, making it a crucial moment for investors as Alphabet’s earnings take center stage.
Meanwhile, data storage giants Seagate Technology and Western Digital have also drawn attention. Seagate’s shares increased by over 10% this week, while Western Digital’s stocks rose about 15%. Morgan Stanley analyst Eric Woodling highlighted Seagate as a top pick, expressing “increasing confidence” in the company’s technological path. He also remarked that the valuation gap of more than 20% compared to competitors seemed “unfair.” However, a 14-day RSI of 75.4 raises concerns that the stock may be moving too quickly.
On the flip side, discount retailer Dollar Tree saw its stock drop more than 8% this week after presenting lackluster guidance that failed to meet Wall Street’s expectations.
