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10 overbought stocks ready to drop

The headquarters of the United States Steel Corp., in Pittsburgh.
John Heller | Bloomberg | Getty Images
The headquarters of the United States Steel Corp., in Pittsburgh.

A group of high-flying names could be at risk of a pullback in the days ahead as investors take profits after the recent market rally, according to traders.

Since the U.S. presidential election on Nov. 8, the S&P 500 index is up about 5 percent, as investors bet that President-elect Donald Trump's campaign promises of lower corporate taxes, deregulation and increased fiscal stimulus could spark a new wave of growth among S&P companies.

The strong gains in areas of the market such as financials and energy, which are up 17 percent and 9 percent, respectively, since the election, has sent many of these stocks to levels some investors consider "overbought."

Similarly, valuation multiples appear stretched, a trend that could hinder the rally, according to market watchers.

"At two times sales, the S&P 500 is at its highest valuation point from a revenue perspective since the tech bubble," Jack Ablin, chief investment officer at BMO Wealth Management, wrote in a note to clients this week.

Should a market pullback materialize, here are some of the names that could be first in line to fall.

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