With the Stock Market at an All-time High, Tesla and Micron Could Be Due for a Pullback

The stock market’s surge to record highs this week has pushed several individual stocks into overbought territory, leaving them vulnerable to a short-term pullback.

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The S&P 500 climbed to an all-time high of 6,600.21, following weaker-than-expected unemployment claims and an unexpected drop in wholesale prices. These data points fueled optimism that the Federal Reserve will deliver at least a quarter-point rate cut next week. By the week’s close, the index had gained 1.6%.

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Still, not all stocks are moving at a sustainable pace. Some names appear stretched after their rapid runs higher.

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Overbought S&P 500 stocks

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Among the most notable names are Tesla (TSLA) and Micron Technology (MU), both showing elevated relative strength readings—75.6 and 81.2, respectively.

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Tesla’s Momentum

Tesla has been on a hot streak in September, gaining 18% month-to-date after another strong week of performance. Momentum picked up after the company’s board introduced a nearly $1 trillion compensation package for CEO Elon Musk, which investors viewed as a strong vote of confidence in leadership.

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However, such rapid gains leave Tesla shares exposed to profit-taking, especially as its RSI suggests it is overextended.

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Micron’s Breakout

Micron delivered a 20% rally this week, its strongest stretch since March 2020. Optimism is building ahead of the company’s fourth-quarter earnings report on September 23, with analysts expecting results that top consensus forecasts.

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Citi analysts boosted their price target on Micron to $175, which represents 11% upside from Friday’s close. In a research note, Citi’s Christopher Danely highlighted that demand for DRAM and NAND memory chips is outperforming expectations, driven largely by data centers, which account for 55% of Micron’s revenue. Limited supply has also helped push pricing higher, adding fuel to the company’s recovery.

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Even so, Micron’s sharp rise in such a short time could invite selling pressure as traders lock in gains.

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Other Notable Overbought Stocks

• Warner Bros. Discovery (WBD): Shares have spiked amid speculation that Paramount and Skydance are preparing a takeover bid, driving the RSI to 83.8.
• Live Nation (LYV): The concert and live events powerhouse also landed on the overbought list with an RSI of 73.6.
• Western Digital (WDC): Leading the pack, Western Digital posted the highest RSI reading at 84.2, raising concerns the stock may be due for a near-term breather.

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What This Means for Investors

While the broader market remains strong, these individual names illustrate how enthusiasm can sometimes get ahead of fundamentals. Elevated RSI readings signal that stocks are overheated in the short term, and a pullback wouldn’t be surprising.

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That doesn’t mean the long-term outlook for these companies is negative. Many remain well-positioned in their industries from Micron benefiting from the memory cycle rebound to Tesla maintaining leadership in electric vehicles. However, investors considering new positions might want to wait for better entry points, while existing holders could prepare for heightened volatility.

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The market’s march to new highs has created a pocket of overbought stocks, highlighting the importance of careful stock selection. For traders and long-term investors alike, monitoring technical signals such as RSI can help identify when a rally is reaching unsustainable levels.

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Tesla, Micron, and Western Digital may continue to capture headlines, but with momentum stretched, the coming weeks could test just how much fuel is left in their rallies.

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