Twenty Overbought Stocks?
As the S&P 500 continues to flirt with new highs for the year, technical-savvy traders have benefited from paying close attention to moving averages for any signals of a potential pullback.
Since the rally began and the S&P pierced through its 50-day moving average back in March 2009, the index has steadily remained above this technical level, briefly testing its lower range, but bouncing back as investors flocked to the stock market.
Moving averages, which are widely used to determine trends and smooth out price fluctuations, seem to have played a key role this year, defining support and resistance numbers.
Investors trading off these metrics tend to look for certain unusual patterns that may develop, taking advantage of any extreme price movements.
Consider the S&P 500 , for example, which has traded, on average, 3.5% over its 50-day MA in the past six months, crossing below this level only a few times.
Indeed, since the S&P's 50-day MA crossed above its 200-day MA for the first time back on June 23, a bullish indicator known as a golden cross, the equity index has advanced 25%.
Some stocks, however, seem to have significantly deviated from their trading ranges, perhaps increasing the risk of a possible retracement in the markets.
Among the companies in the S&P 500 that are farthest away from their 50-day moving average, Advance Micro Devices and Nvidia take the first two spots.
At the current levels, the S&P 500 is about 2.6% over its 50-day MA, while AMD and NVDA are 42.7% and 26%, respectively.
While a bullish trend may not neccessarily mean that a stock is overvalued, it could certainly serve as point of reference as per when investors may start taking profits off the table.
Here is a look at stocks in the S&P 500 trading farthest above their 50-day moving averages.
Top 20 S&P 500 Stocks Trading at Greatest Distance Above 50-Day Avgs: