Have you ever watched a stock soar so high you wondered if it could keep climbing? May 2025 was a wild ride for Wall Street, with the S&P 500 jumping over 6%—its best month since late 2023. The Nasdaq? A jaw-dropping 9.6% surge. Even the Dow chipped in with a solid 4% gain. But here’s the thing: some stocks might have gotten a bit too excited. Using the Relative Strength Index (RSI), a trusty momentum gauge, I’ve dug into the market to spot which names are looking overbought—and potentially ready for a breather.
Why Overbought Stocks Matter
When a stock’s RSI climbs above 70, it’s like a sprinter who’s been running full tilt—exhausted and maybe due for a rest. This doesn’t mean a crash is coming, but it’s a heads-up for investors to tread carefully. May’s rally, fueled by easing trade tensions and a surprise U.S.-UK trade deal, pushed some stocks into overdrive. Let’s break down the key players, why they’re overheated, and what it means for your portfolio.
Johnson Controls: Riding High but Risky?
Topping the overbought list is Johnson Controls, a company that’s been killing it in the commercial HVAC world. With an RSI of 86.9, this stock is screaming “overbought.” It soared 20.8% in May alone, and it’s up a whopping 28% year-to-date. Why the surge? A stellar earnings report in early May beat expectations, and a new CEO has analysts buzzing about operational improvements.
The new leadership is unlocking significant growth potential for Johnson Controls.
– Industry analyst
But here’s where I get a bit skeptical. Stocks this hot often need a cooldown. The RSI suggests investors might be piling in too fast, and a pullback could be on the horizon. If you’re holding, maybe consider trimming your position or setting a tight stop-loss.
Broadcom: Semiconductor Star or Overvalued?
Next up is Broadcom, a semiconductor giant that’s been riding the tech wave. With a 26% jump in May and an RSI of 79.3, it’s firmly in overbought territory. Broadcom’s custom chips are in high demand, but with earnings looming in mid-June, the stock’s valuation is raising eyebrows. Analysts think it’s trading about 1% above its fair value, which isn’t huge but enough to warrant caution.
I’ve always been fascinated by how semiconductors power so much of our world, from smartphones to AI. But when a stock like Broadcom gets this frothy, it’s worth asking: Is the hype sustainable? If earnings disappoint, we could see a quick dip.
- Key Risk: High valuation could lead to profit-taking.
- Opportunity: A dip might offer a buying chance for long-term investors.
- Watch Point: June earnings will be critical.
GE Aerospace and Intuit: Still Flying High
Two other names caught my eye: GE Aerospace and Intuit. Both popped up as overbought last week and kept climbing, with May gains of 22% and 20%, respectively. GE Aerospace is thriving in the aviation rebound, while Intuit’s software solutions are riding the digital transformation wave. But with RSIs above 70, these stocks might be due for a pause.
In my experience, momentum like this can be thrilling but nerve-wracking. It’s like watching a rocket launch—you’re amazed by the climb, but you know gravity’s waiting. Keep an eye on these two, especially if market sentiment shifts.
Oversold Stocks: Bargains or Traps?
On the flip side, some stocks are looking oversold, with RSIs below 30 signaling potential bargains. UnitedHealth is the standout here, with an RSI of 20 after a brutal 26.6% drop in May. That’s on top of a 21.4% slide in April. Ouch. The healthcare giant’s struggles seem tied to broader sector headwinds, but this low RSI suggests a rebound could be near.
Then there’s Cooper Companies and Copart, with RSIs of 24.5 and 20.9. Cooper, a medical device maker, tanked 16.4% this month after cutting its growth forecast. Copart, a vehicle auction company, also took a hit. Are these oversold names screaming “buy”? Maybe, but I’d dig deeper into their fundamentals before jumping in.
Oversold stocks can be opportunities, but only if the fundamentals hold up.
– Financial advisor
What’s Driving the Market?
May’s rally wasn’t just random. A cooling in U.S.-China trade tensions and a fresh U.S.-UK trade deal sparked optimism. Investors love clarity, and these developments provided just enough to fuel the surge. But as June looms, the market’s mood is still shaky. Daily headlines about tariffs and trade talks keep everyone on edge.
Here’s my take: markets hate uncertainty, and we’re not out of the woods yet. If trade talks stall, those overbought stocks could face a reality check. On the other hand, oversold names might catch a bid if sentiment improves.
| Stock | RSI | May Performance | Status |
| Johnson Controls | 86.9 | +20.8% | Overbought |
| Broadcom | 79.3 | +26% | Overbought |
| UnitedHealth | 20 | -26.6% | Oversold |
| Cooper Companies | 24.5 | -16.4% | Oversold |
How to Play Overbought and Oversold Stocks
So, what’s the game plan? Overbought stocks like Johnson Controls and Broadcom might tempt you to cash out or hedge with options. Oversold names like UnitedHealth could be worth a look, but only if you believe in their long-term story. Here’s a quick roadmap:
- Check the RSI: Use it as a starting point, not gospel. Combine with other indicators like moving averages.
- Dig into Fundamentals: A high RSI doesn’t mean sell, just like a low RSI doesn’t mean buy. Look at earnings, debt, and growth.
- Watch the News: Trade talks and sector trends can shift momentum fast.
Personally, I love using RSI to spot opportunities, but it’s just one tool in the toolbox. Pair it with solid research, and you’re golden.
Looking Ahead to June
As we head into June, the market’s at a crossroads. Will trade optimism hold, or will new tariff threats shake things up? For overbought stocks, I’d keep a close eye on earnings and broader market cues. For oversold names, a little patience might pay off if sentiment shifts.
Perhaps the most interesting aspect is how quickly sentiment can flip. One day, it’s all rosy; the next, it’s panic mode. That’s why staying informed and agile is key. What do you think—ready to navigate this market rollercoaster?
Navigating overbought and oversold stocks is like walking a tightrope—exciting but tricky. By keeping an eye on indicators like RSI and staying tuned to market vibes, you can make smarter moves. Whether you’re eyeing a dip in Broadcom or a bounce in UnitedHealth, the key is to stay sharp and act thoughtfully.
