Rally Getting Overbought, Cut Long Positions: Charts

After such an unprecedented rally in worldwide markets since the bottom in March, it's tough to see how much further stocks can go, Steven Mayne, head of research at Falcon Securities, said Friday.

"By the looks of things, our rally does really seem very overextended now," Mayne said. "We're getting towards levels where the general market is overbought."

"That doesn't necessarily mean we should start looking to short the markets straight away," Mayne told CNBC. "Something can stay overbought or oversold for a great period of time. When the market tends towards such overbought levels, maybe start reducing our long exposures… start taking some chips off the table and wait and see where the next move is going to be."

"What I really want to get across here is because they are very overbought at the moment, maybe start taking some long positions off as opposed to blindly going short on these stocks at the moment," he added.

If the market is going to fall, stocks to be looking at on the downside should include companies like UK miner Antofagasta , Mayne suggested.

"A number of the FTSE mining stocks really have been performing incredibly well recently in the markets and now even these are looking overbought," he said. "So if we do start seeing the market turning around, Antofagasta, (BHP) Billiton or even Kazakhmys do start looking very overbought as well. And really for those people who are trading on the shorter terms, so maybe day-to-week traders, the mining stocks have been a great source of upward moves and for long speculators, and should hopefully really soon become an excellent place for short speculators as well," he said.

The same goes for UK retailer Next , Mayne said.

"The retailers aren't normally quite so volatile on a day-to-day basis, as the miners can be," he said. "So for people who don't like trading whilst biting their fingernails, maybe Next will be a slightly nicer thing to start shorting."