Super Micro Computer, a leading computer server manufacturer, has experienced remarkable growth in its stock price, surging around 300% year to date and a staggering 1,100% over the past 12 months. However, according to Wolfe Research, it may be prudent for investors to step away from the stock for now as it enters a deeply overbought territory.
Rob Ginsberg, a strategist at Wolfe Research, highlights that Super Micro Computer has become “The Poster Child of the Momentum Factor.” The stock’s relative strength index (RSI) recently reached an eye-opening 97, indicating an extremely overbought condition. RSI is a widely followed momentum metric that indicates whether a stock is overbought or oversold. An RSI above 70 signals overbought, while an RSI below 30 suggests oversold conditions.
Although Super Micro Computer’s RSI has decreased to 65, it is still hovering near overbought levels. Ginsberg advises investors to consider booking profits on the stock, particularly as it prepares for inclusion in the S&P 500. The stock’s inclusion is driven by the growing demand for servers due to the exponential growth of artificial intelligence and the increasing data needs associated with the technology.
FAQs:
What does “overbought” mean in relation to stock prices?
“Overbought” refers to a situation where the price of a stock has risen too quickly and too high, potentially indicating that the stock is overvalued. Overbought conditions generally suggest that a stock may be due for a price correction or a period of consolidation.
What is the relative strength index (RSI)?
The relative strength index (RSI) is a technical indicator used by investors and traders to help identify overbought or oversold conditions in a stock. RSI values range from 0 to 100, with readings above 70 considered overbought and readings below 30 considered oversold.
Why is Super Micro Computer’s inclusion in the S&P 500 significant?
Inclusion in the S&P 500 is a significant event for a company as it means that its stock will be included in the index, which is widely regarded as a representation of the overall performance of the US stock market. This inclusion can attract new investors and potentially lead to increased demand for the stock.
-Sources: www.wolfereport.com
FAQs:
What does “overbought” mean in relation to stock prices?
“Overbought” refers to a situation where the price of a stock has risen too quickly and too high, potentially indicating that the stock is overvalued. Overbought conditions generally suggest that a stock may be due for a price correction or a period of consolidation.
What is the relative strength index (RSI)?
The relative strength index (RSI) is a technical indicator used by investors and traders to help identify overbought or oversold conditions in a stock. RSI values range from 0 to 100, with readings above 70 considered overbought and readings below 30 considered oversold.
Why is Super Micro Computer’s inclusion in the S&P 500 significant?
Inclusion in the S&P 500 is a significant event for a company as it means that its stock will be included in the index, which is widely regarded as a representation of the overall performance of the US stock market. This inclusion can attract new investors and potentially lead to increased demand for the stock.
Definitions:
– Overbought: When the price of a stock has risen too quickly and too high, potentially indicating that the stock is overvalued and due for a price correction or a period of consolidation.
– Relative Strength Index (RSI): A technical indicator used by investors and traders to help identify overbought or oversold conditions in a stock. RSI values range from 0 to 100, with readings above 70 considered overbought and readings below 30 considered oversold.
– S&P 500: A stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is widely regarded as a representation of the overall performance of the US stock market.
Related links:
– Wolfe Research