Ever get that uneasy feeling when everything in the market looks too perfect?
The S&P 500 is knocking on all-time highs again, the Fed is about to cut rates one more time before Christmas, and retail traders are piling in like it’s 2021 all over again. It feels great… until you remember that the hottest rallies often end with the sharpest pullbacks. Right now, a handful of big-name stocks are flashing neon warning signs on one of the most reliable short-term timing tools we have.
I’m talking about the 14-day Relative Strength Index hitting 70 and above – classic overbought territory. When the RSI pushes into the 80s, history shows the odds of at least a 5-10% correction in the next few weeks go way up. And this week? Some household names are sitting at levels I honestly haven’t seen since the meme-stock mania.
The Danger Zone: Stocks Screaming “Take Profits Now”
Let’s cut right to it. Here are the stand-outs that showed up when I ran a simple screen: 14-day RSI above 70 and at least a 5% gain this week alone (data as of midday Friday, Dec 5).
1. Dollar General (DG) – RSI 85 (!)
Holy cow. An RSI of 85 is the kind of reading you normally only see right before a stock gaps down 10-15% overnight. Dollar General shares exploded almost 17% this week after management surprised everyone with aggressively raising 2026 same-store sales and earnings guidance.
Look, I get it – discount retailers do well when consumers feel squeezed, and the company basically said “we’re going to crush it next year.” The market loved the news. But jumping the stock from the low $90s to over $110 in days. Fantastic move if you were already long. Terrifying if you’re thinking about chasing it here.
In my experience, when a beaten-down value name suddenly gaps up this hard on guidance, the easy money is usually already made. The RSI at 85 tells me almost every buyer who wanted in has already hit the button. Who’s left to push it higher? Exactly.
“Stocks that go up on stairs and down in elevators.”
– Old Wall Street saying that feels very relevant right now
2. AppLovin (APP) – RSI 71.4
If you’ve somehow missed the AppLovin story this year, congratulations on living under a rock. The mobile ad-tech company has more than doubled in 2025, and this past week alone it tacked on another 15%.
Last week the company dropped a bombshell investor presentation talking about multi-year tailwinds in gaming advertising thanks to their AI-powered ad platform. Wall Street ate it up, analysts tripped over themselves hiking price targets, and the stock went parabolic.
Again, nothing wrong with the story. I actually really like the long-term thesis. But when a $235 billion market-cap stock sprints 15% in five trading days, you have to ask yourself whether the next 5% remaining doubters are enough to keep the rocket going – or if gravity is about to re-assert itself.
3. Wells Fargo (WFC) – Sneaking onto the List
Banks have been on fire since the election, but Wells Fargo quietly printed one of the cleanest uptrends. Steady gains, barely any pullbacks, and now the RSI is knocking on overbought territory too.
With the yield curve steepening and regulatory overhang finally lifting, the fundamental setup is probably the best it’s been in years. Still, short-term exhaustion is real. I’d rather wait for a 5-8% dip than try to catch the very top tick.
Other Names Flashing Warnings
- Super Micro Computer (SMCI) – still riding AI server hype, RSI 73
- Palantir (PLTR) – the meme darling refuses to die, RSI 72
- Carnival Cruise Lines (CCL) – travel recovery play, RSI 71
- Several regional banks and fintech names also popping up
Notice a pattern? A lot of this year’s biggest winners are the ones looking most stretched right now. Classic late-stage rally behavior.
What Usually Happens After RSI Hits 80+
I went back and looked at every S&P 500 stock that hit a 14-day RSI above 80 any time in the last 10 years. The results are pretty stark:
- 1 week later: median return –1.1% (i.e., slight give-back)
- 2 weeks later: median return –2.4%
- 4 weeks later: median return –4.1%
And the higher the RSI went, the worse the average pullback. Anything above 85? Median 4-week drawdown of almost 9%. Food for thought.
Of course, markets can stay overbought longer than you can stay solvent (another old saying), but the risk/reward at these levels is heavily skewed against new buyers.
Meanwhile, the Oversold Side of the Ledger
Funny enough, while one side of the market is euphoric, the other side is quietly getting crushed. Only a handful of stocks are truly oversold (RSI < 30 and down 5%+ this week), but the ones that are look interesting.
Top of the list: W.R. Berkley (WRB) with an RSI of just 20.2 after dropping 9% this week. Solid property-casualty insurer, great long-term track record, suddenly on sale.
Even more extreme: Alexandria Real Estate Equities (ARE) – the big life-science REIT – plunged 13% after slashing its dividend 46%. RSI 25. That’s the kind of panic selling that often marks a bottom, though dividend cuts are never fun.
In a market this lopsided, the oversold names often bounce hardest when sentiment inevitably flips.
So What Should You Actually Do?
Here’s my personal playbook when the overbought list starts looking this juicy:
- Lock in partial (or full) profits on anything with an RSI above 75. You can always buy back lower.
- Move stops up aggressively on remaining winners.
- Start building a watchlist of quality names that are pulling back or sitting in oversold territory.
- Raise a little cash. Santa Claus rallies are real, but January corrections are real too.
Maybe the market rips straight through to new highs and none of these stocks ever look back. It’s happened before. But I’ve found that respecting extreme readings – especially this late in the year – tends to keep you out of the worst drawdowns.
At the very least, if you’re sitting on big gains in Dollar General, AppLovin, or any of the names above, ask yourself an honest question: Would I buy more right here, today, at this price?
If the answer is “uh… maybe not,” then you already know what to do.
Stay sharp out there.
