Charts: How to Play Overbought Markets
The FTSE-100 index is "generally overbought," Steven Mayne, head of research at Falcon Securities said Tuesday, adding that "is does seem like a small, little pullback is needed." But he does see the UK index rising to 5,000 points before the year is over.
He voiced concern that the market may be overextended and cautions investors that a pullback may be on the horizon.
Mayne therefore suggests not adding "aggressively" to long positions, and instead thinks investors should "take a couple of chips off the table here and just let the market sort itself out over the short-term."
"Just because we think the market's overbought doesn't mean there's not value out there," Mayne told CNBC.
"United Utilities (Group) United Utilities (Group might not be the most exciting or fun company to trade on a day-to-day basis," he said. "But the new low on United Utilities formed a handful of days ago … (is) indicating that the next move on this company should be higher."
He points out the UK group's got a "nice" dividend yield of 9 percent and that this makes it "not bad for long-term investors."
British America Tobacco has "really, really had a strong run recently," Mayne said, adding that "it doesn't seem to have that much upside left in it."
"So if you do want to trade short the market in these overbought conditions … British American Tobacco seems like a company which is leaning toward the top of its upward movement," he said.