Overbought Momentum Risks in Tech and Telecom Stocks: A Short-Term Implosion Alert

The tech and telecom sectors, long celebrated for their innovation and growth, have entered a precarious phase in late 2025. With key players exhibiting overbought conditions on the Relative Strength Index (RSI), coupled with mixed price action and thin holiday trading volume, the stage is set for potential short-term corrections. This analysis examines the technical and fundamental factors driving these risks, focusing on stocks like Warner Bros Discovery (WBD), Array Digital Infrastructure (AD), and Fox Corp (FOX), while highlighting broader market dynamics.

Overbought RSI Levels Signal Correction Risks

The RSI, a momentum oscillator measuring price strength relative to recent performance, has flagged several tech and telecom stocks as overbought. For instance, Warner Bros Discovery (WBD) closed December 2025 with an RSI of 82.3, a level traditionally associated with overbought conditions and heightened vulnerability to pullbacks according to technical analysis. Similarly, Array Digital Infrastructure (AD) and New York Times Co (NYT) registered RSI values of 73.2 and 79.3, respectively according to trend data. These readings suggest that investors may soon face profit-taking or bearish reversals as technical indicators lose steam.

The overbought status of these stocks is further amplified by recent price action. AD, for example, surged 15% over a one-month period but closed December 23 at $53.60, down 0.2%, signaling early signs of exhaustion. Meanwhile, NYT rose 11% in the same period, yet its RSI remains in overbought territory, raising questions about the sustainability of its gains.

Price Action and Divergent Technical Signals

Price action analysis reveals conflicting signals for overbought stocks. AD exemplifies this duality: while its RSI and moving averages (MA5, MA10) suggest a "buy" signal, the 200-day MA and stochastic RSI point to overbought conditions. This divergence creates a "hold" recommendation, as shorter-term bullish momentum clashes with longer-term bearish trends. Similarly, Fox Corp (FOX), with an RSI of 70.9, has shown bearish RSI divergence in November 2025, indicating weakening momentum despite a 17% monthly price gain.

The broader market context complicates these signals. Thin holiday volume in December 2025 has reduced institutional participation, allowing retail-driven volatility to dominate. This dynamic increases the likelihood of exaggerated price swings, particularly for overbought stocks like WBD, which faces regulatory and political headwinds following its $82.7 billion acquisition by Netflix.

Volume Trends and Corporate Events Amplify Risks

Volume patterns in December 2025 underscore the fragility of current momentum. For WBD, the Netflix acquisition triggered a 6.28% intraday gain on December 5 but also sparked a 3.4% dip after a competing $108.4 billion bid from Paramount Skydance. Such corporate events create liquidity imbalances, making overbought stocks prone to sharp corrections.

In contrast, AT&T (T)-though not overbought-exhibits bearish volume trends. Despite a 1.2% daily gain on December 18, its monthly decline of 5.98% reflects waning investor confidence amid concerns about churn and ARPU growth. Analysts at Wolfe Research have downgraded AT&T, citing risks to EBITDA and EPS estimates in 2026.

Implications for Investors

The confluence of overbought RSI levels, divergent technical signals, and thin volume creates a high-risk environment for short-term traders. Stocks like AD and WBD may experience rapid reversals if key support levels break or corporate news triggers panic selling. For example, AD's price hovering near $53.70-a horizontal trendline-suggests a potential breakout, but a failure to clear this level could trigger a sell-off.

Investors should also monitor macroeconomic catalysts, such as geopolitical developments and regulatory decisions, which can amplify volatility in overbought stocks. The WBD acquisition saga, for instance, remains subject to antitrust scrutiny, adding another layer of uncertainty.

Conclusion

While the tech and telecom sectors continue to benefit from AI and 5G-driven innovation, overbought momentum in late 2025 has created a fragile equilibrium. Stocks like WBD, AD, and FOX face heightened implosion risks due to RSI extremes, conflicting technical indicators, and thin trading volume. Investors are advised to adopt a cautious approach, using RSI divergences and volume trends as early warning signals. As the market enters a new year, the key will be balancing optimism about long-term growth with vigilance against short-term corrections.