A collection of stocks on Wall Street may have recently gotten ahead of themselves. The broader market edged higher on Friday after Federal Reserve Chair Jerome Powell gave the most concrete signal yet that an interest rate cut is imminent. The benchmark S & P 500 is on pace for about a 1.
2% gain this week, while the Dow Jones Industrial Average and Nasdaq Composite have advanced 1% and 1.3%, respectively. Within that performance, some stocks may have become overheated and are signaling that they are overbought as measured by their 14-day relative strength index, or RSI.
An RSI above 70 can signal that a stock is overbought and ripe for a pullback. Here is a look at some of the stocks with elevated RSI readings. Shares of aerospace and defense contractor Northrop Grumman have advanced roughly 9% in 2024 and 5% in August alone.
The company's second-quarter results in July surpassed Wall Street estimates on the top and bottom line, while Northrup's full-year revenue outlook also beat analyst expectations. But the stock's 14-day RSI of 81.4 could indicate shares have gotten ahead of themselves.
Analysts polled by FactSet maintain a consensus hold rating on the stock, with their average price targets implying roughly 4% downside over the next year. To be sure, UBS analyst Gavin Parsons recently highlighted Northrop as the bank's top pick among aerospace and defense stocks, citing awards of two of the Pentagon's top three "priority programs" as well as higher defense spending. Sna.