The Stock of Apple is One of the Most Overbought on Wall Street. Here Are the Others

The S&P 500 has faced challenges this December, with certain stocks showing potential for further declines. Over the past week, the broad-market index slipped 0.6%, marking a pause in the significant rally equities have experienced since President-elect Donald Trump secured the White House last month. Meanwhile, the Dow Jones Industrial Average dropped 1.8% for the week. In contrast, the tech-heavy Nasdaq Composite saw a modest gain of 0.3%.

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CNBC Pro leveraged its stock screener to identify Wall Street’s most overbought and oversold stocks based on their 14-day relative strength index (RSI). Stocks with an RSI above 70 are considered overbought, suggesting they might be due for a pullback. Conversely, those with an RSI below 30 are deemed oversold, indicating potential for a rebound.

Overbought Stocks

The list of overbought stocks this week leaned heavily toward the tech sector and included prominent names like Apple, a leader among the “Magnificent Seven.” Apple’s RSI hit 74, highlighting its strong momentum. Year-to-date, Apple’s stock has surged 28.9%.

Both Bernstein and Morgan Stanley recently reiterated their overweight ratings for Apple, with the latter naming it a top pick for 2025. Morgan Stanley outlined three key factors driving their optimism: the potential for Apple Intelligence to accelerate iPhone upgrade cycles starting in fiscal year 2026, continued double-digit growth in the company’s Services segment, and expanding gross margins.

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Another notable member of the “Magnificent Seven,” Tesla, appeared on the overbought list with an RSI of 77. The electric vehicle giant has seen its stock soar over 73% since the election, contributing almost entirely to its annual gains after underperforming earlier in the year. On Friday, Tesla shares closed at a record high.

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Analysts have attributed Tesla’s performance to what has been dubbed the "Trump bump," bolstered by CEO Elon Musk’s close ties with the president-elect. Craig Irwin, an analyst at Roth MKM, remarked during CNBC’s Squawk on the Street that Musk’s alignment with Trump has likely doubled Tesla’s base of enthusiasts and boosted the company’s credibility, resulting in a surge in demand.

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ServiceNow, a prominent enterprise software company, also featured on the overbought list with an RSI of 73. However, KeyBanc analyst Jackson Ader downgraded the stock from overweight to sector weight, signaling caution.

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“ServiceNow has been an early AI leader and remains one of the most flexible software platforms available,” Ader noted. Despite anticipating continued robust subscription growth of around 20% and free cash flow margins exceeding 30%, he expressed concerns about the stock’s valuation and emerging risks. ServiceNow’s shares have risen 58.7% this year, reflecting its strong position in the market.

Oversold Stocks

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On the flip side, Omnicom Group, a major player in marketing and communications, appeared among the most oversold stocks with an RSI of 24. The company’s shares have underperformed the broader market, gaining just 4.4% in 2024.

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Earlier this month, Omnicom’s stock declined following its announcement of a stock-for-stock acquisition of Interpublic. This transaction, expected to close in the second half of next year, has dampened investor sentiment despite the company’s otherwise stable outlook.

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Other notable names on the oversold list included pharmaceutical giant Johnson & Johnson and energy firm Consolidated Edison, both of which have struggled to keep pace with the broader market.

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The current market dynamics reflect heightened sensitivity to valuation metrics as investors weigh the sustainability of the recent rally. While technology stocks have led much of the year’s gains, the inclusion of some major players on the overbought list suggests a potential cooling-off period may be on the horizon.

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Meanwhile, the presence of undervalued stocks like Omnicom and Consolidated Edison on the oversold list offers opportunities for contrarian investors seeking to capitalize on potential rebounds.

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As market participants assess the impact of macroeconomic factors and evolving corporate strategies, the RSI remains a valuable tool for identifying stocks that may be poised for near-term movements. By monitoring these indicators, investors can better position themselves in a volatile and fast-changing market environment.

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