Tesla Is The Most Overbought Stock On Wall Street

Tesla emerged as the most overbought stock of the week, as indicated by the widely used "relative strength index" (RSI). The RSI allows investors to assess the velocity and magnitude of recent price movements, providing insights into potential overbought or oversold conditions in the market.

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When a stock's 14-day RSI exceeds 70, it is considered overbought, signaling that traders should consider reducing their exposure. Conversely, a stock with a 14-day RSI below 30 is deemed oversold, indicating negative sentiment around the stock and suggesting a potential buying opportunity.

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Based on this metric, Tesla recorded a 14-day RSI of 91.46, making it the most crowded stock during this period. Remarkably, the electric vehicle manufacturer achieved its longest winning streak of 11 days, concluding the week on a positive note. This surge was attributed to the announcement of a partnership between Tesla CEO Elon Musk and General Motors CEO Mary Barra, granting GM access to Tesla's charging stations in North America.

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Nonetheless, this high level of overbought activity may indicate that investors will soon need to divest from the stock. According to analysts surveyed by FactSet, the stock is projected to decline by 17% from its current position. Notably, only 40% of analysts have assigned a buy rating to Tesla.

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Besides Tesla, several other stocks exhibited overbought characteristics based on the relative strength index this week.

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Adobe was another notable stock that experienced significant investor interest, with a 14-day RSI of 80.88. In fact, Wells Fargo upgraded the software company's stock to overweight from equal weight on Friday and raised its price target from $420 to $525. The Wall Street firm anticipates that Adobe will benefit from advancements in artificial intelligence (AI). However, only 41% of analysts consider Adobe a buying opportunity, and consensus estimates from FactSet suggest a potential decline of approximately 0.8% in the stock's value.

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Enphase Energy and Match Group were also identified as overbought stocks during this period.

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In contrast, let's examine some of the most oversold stocks of the week.

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Target fell into the oversold category, with the retail stock experiencing a decline of over 4% throughout the week and registering a 14-day RSI score of 13.85. On Friday, Citi downgraded Target from buy to neutral and revised its price target from $177 to $130, citing concerns that sales may have reached their peak at the prominent big-box retailer. Merely 42% of analysts have assigned a buy rating to Target. Nevertheless, analysts anticipate that the stock has the potential to rise by more than 30% based on consensus estimates.

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Ulta was another oversold stock, recording a 14-day RSI of 17.93. Only approximately 46% of analysts have recommended purchasing this stock. On average, these analysts project an upside potential of approximately 28% for the beauty retail company. Despite a recent sell-off following its quarterly results, UBS identified Ulta as one of its top investment ideas, stating that the risk-reward ratio is "firmly tilted to the upside."

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Additional oversold stocks of the week include Advance Auto Parts and AutoZone.

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