This Week's Huge Rally in Nvidia Has Made It One of the Most Overbought Stocks on Wall Street

Nvidia's impressive year-to-date surge, with shares up by 77%, has prompted speculation of a potential pullback. Despite a 6% surge this week, defying the broader decline in technology stocks, Nvidia's prolonged winning streak of nine consecutive weeks has led analysts to believe that the stock might be overextended, according to the widely watched metric, the 14-day relative strength index (RSI).

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Our CNBC Pro stock screener tool identified overbought and oversold stocks based on their 14-day RSI. Assets with an RSI above 70 are considered overbought and at risk of a correction. Nvidia, ranked as the fourth-most overbought stock, boasted an RSI of approximately 86. Amid midday trading, the stock experienced a 6% pullback as semiconductor stocks took a pause.

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Nvidia's remarkable performance has been a significant driver of the 2024 rally, contributing to a market value increase of over $1 trillion year-to-date. Notably, it has accounted for approximately 30% of the S&P 500's cumulative gains in the same period, according to data from LSEG.

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Joining Nvidia on the overbought list are Howmet Aerospace and General Electric, both with RSIs surpassing 89. General Electric witnessed a more than 6% increase this week and an additional 1% on Friday, following an upgrade from JPMorgan, which expressed confidence in the company's sustained outperformance.

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Jabil, Leidos Holdings, and American Express also made the overbought list, underscoring the broader trend of heightened investor enthusiasm in these stocks.

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Conversely, the oversold category includes Apple, with an RSI around 26. A stock is considered oversold when its RSI falls below 30, potentially indicating a buying opportunity. Despite facing headwinds, such as a $2 billion fine and declining sales in China, Apple managed to rebound by around 2% on Friday. However, its week-to-date gains were offset, resulting in a projected 4% decline for the week. Notably, Apple is emerging from its longest losing streak in over two years.

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The assessment of overbought and oversold stocks based on RSI provides valuable insights for investors looking to navigate the volatile market conditions. While Nvidia's stellar run has fueled optimism, the cautionary RSI signal suggests a potential need for a breather. Investors will be keenly watching whether the trend continues or if a pullback materializes in the wake of the stock's impressive performance.

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