Large-cap overbought stocks: As we all know the market is making new all-time highs every day. Every day there is some kind of positive news which is fueling the Nifty. In this rally, new investors are getting excited as they are getting handsome returns in a very short period. Also, IPOs are giving bumper returns which also attract new people to enter in stock market.
In this stock market rally, the new investors need to be extra conscious to put in lump sum amount. Finding stocks that are present at a fair valuation is very difficult in this market. As the stocks are making new all-time highs every day we get excited to put more and more money or not to book profit. In this article, we are going to discuss five large-cap overbought stocks that you should avoid to put lump sum money and fresh buying.
Table of Contents
What is Overbought Stock?
The parameter to judge whether a stock is overbought or not is different. This parameter is based on whether you followed technical analysis or fundamental analysis. In fundamental analysis we more focused on valuation and PE ratio. If the stock PE ratio is more than 30 then we say that the valuation is on a higher side and the stock is overbought.
whereas in technical analysis we take the help of charts and Indicators to find whether a stock is over-bought or not. Relative strength indicator(RSI) is a Momentum indicator that we use to find the strength and ultimately whether the stock is overbought or oversold.
when the RSI value is greater than 70 then we say that stock is in overbought condition and it should be avoided for fresh investment. similarly when the RSI value is less than 30 then the stock is in the oversold condition and it can be bought for long-term investment or swing trading.
now we have understood how to judge a stock whether it is in an overbought condition or not. Now in this article, I am going to tell you five large-cap overbought stocks based on technical analysis that you should avoid for fresh buying.
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Large-cap overbought stocks #1–HDFC BANK Stock
HDFC banks India’s largest private-sector bank. It is a favourite stock of fiis and diis but for the last three years, it hasn’t given any massive Returns. HDFC Bank recently had a merger with HDFC. After the merger analysts downgraded HDFC Bank because of its future growth perspective. This made HDFC bank stock touch the level of Rs.1460 and at this level, the stock is in oversold condition.
Big players accumulated stock from that level and now this stock is trading at the Rs 1650 level. Now the stock is in the overbought condition and it is not a good time for fresh investment or lump sum investment it is a good stock but you should wait for some correction and after that, you can make some position in this stock.
Large-cap overbought stocks #2- ICICI Bank Stocks
ICICI Bank is the second largest private sector bank in India. In the market, there is a rumour going on that ICICI Bank is going to become like HDFC Bank in future and its stock will give massive returns just like HDFC Bank. well nobody knows the future but this stock has given a 15% return in just one year. Analysts are also very bullish on this stock. Right now this stock is trading at a time high of Rs1035 and in the overbought condition. Similar to HDFC Bank stock it is also avoided for fresh investment.
Large-cap overbought stocks #3 Trent Stock
Trent is an Indian retail company and it is a part of Tata Group. Trent is the one who owns Zudio, Westlife and Zara. Westlife and Zara used to cater the luxury clothing, whereas Zudio focus on affordable clothing. After the expansion of the Zudio store, Trent gave massive returns. In just one year Trent has given around 105%. As Trent is in the clothing industry which is an evergreen sector. Analysts are also super bullish on Trent looking at its plan and expansion. Right now the stock is trading at a price of Rs2,966 and it made a new all-time high price. Trent is a very good stock and you should keep an eye on it but it is not a good time for fresh buying as it is in over-brought condition.
Large-cap overbought stocks #4– Gail Stock
GAIL (India) Limited is a major state-owned natural gas processing and distribution company in India. PSU sector has given a massive rally and Gail has also participated in this rally. Generally, investors used to avoid the PSU sector because of government regulation. Most of the PSU stocks were present at a very cheap valuation and Gail is one of them. Recently Gail broke the previous all-time high of Rs130 and gave an upside breakout. Right now the stock is trading at a new all-time high of Rs146. Gail is also trading in the overbought condition i.e. it should be avoided for new or fresh investment.
Large-cap overbought stocks #5 –Hero MotoCorp Share
Hero MotoCorp Ltd. is the world’s largest manufacturer of two-wheelers Hero MotoCorp Ltd. Hero MotoCorp bikes are very popular all over the world. Hero MotoCorp is known to produce the best affordable bikes like Splendor. Hero MotoCorp made a collaboration with Harley Davidson to produce premium bikes as well. The demand for two-wheeler vehicles is increasing rapidly all over the world and being the market leader Hero MotoCorp will get its maximum benefit. Right now stock is in overbought condition and it is very close to its all-time high of Rs4060.
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FAQ
what is overbought stock?
Overbought stocks are overvalued. In technical analysis, we use the RSI indicator to judge whether the stock is overbought or not. If the value of RSI is greater than 70 then the stock is overbought
Conclusion
large-cap stocks are considered to be less risky as considered to be small-cap or mid-cap. But when buying large-cap stock we should always check whether the stock is in the overbought or not. In this article, we have discussed five large-cap overbought stocks. Hope this article helps you to make better decisions. We have not given any buy or sell recommendations. This article is just for study purposes. please consult your financial advisor before making any financial decision.
