5 Bearish Stocks That Are Extremely Overbought with Optimum or Fundamental Overhype

The stock market has been quite a struggle (boring!) these days, as macro traders keep pressing the sell button amid rising Middle East tensions. Meanwhile, investors are eager to buy the dip, believing U.S. tech remains fundamentally intact due to minimal exposure to the region and continued growth potential. However, the S&P 500 is hovering near record highs, and no major news has been able to push it higher. As we suggested last week, names like Coinbase and Netflix saw a nice bounce. Yet many stocks are now reaching extremely overbought levels—prime targets for short positions or put options that could deliver huge profits.

Micron (MU)

Micron shares have been the shiny star lately, especially ahead of earnings scheduled for Wednesday post-market. However, its RSI has surged to ~94—an extremely overbought level. The last time it reached that point was on May 13, when the stock entered a consolidation phase and later dropped over 6%. Another similar case occurred in December 2020, when shares fell 4% over the following four sessions. History offers solid evidence that extreme bullishness may not always signal further upside.

Moreover, investors appear to have already loaded up ahead of earnings, a setup that often leads to a classic “sell the fact” pattern. Given the limited upside in the broader market, caution heading into earnings seems warranted.

Micron’s results may benefit from AI GPU demand driven by Nvidia and AMD. However, its DRAM segment could come under pressure due to exposure to iPhone, especially as Trump continues to push tariffs.

Meta (META)

Meta’s AI push is ambitious, but Zuckerberg might be heading in the wrong direction, potentially dragging shares into a “Metaverse 2.0” era. For instance, Meta’s Llama model lags behind ChatGPT, Gemini, and several Chinese AI startups. The latest version has also sparked controversy. In response, Meta spent $14.8 billion acquiring a 49% stake in Scale AI, a company that essentially employs gig workers to label data and now houses CEO Alexandr Wang under a new “superintelligence” division.

This acquisition is questionable—Scale AI isn't a true AI company but more like a data-labeling operation. It’s hard to believe Alexandr Wang can suddenly build a top-tier LLM to enhance performance. The move simply echoes Zuckerberg’s previous Reality Labs vision—burning cash with minimal return, leaving investors increasingly uneasy. And he may be repeating that cycle.

Technically, the chart shows signs of fatigue. Shares are consolidating, and Friday’s sell-off tested a support level. Meta's underperformance compared to the broader market suggests investors are losing patience with its latest initiatives. A break below this support could bring more downside. Still, considering Meta AI’s capability, investors may want to remain cautious.

ExxonMobil (XOM)

Oil & gas names have benefited from rising geopolitical risk, as Middle East tensions drive energy prices higher. And the strong U.S. economic backdrop adds to the sector’s profitability. Still, this may turn out to be another “buy the rumor” setup. Iran lacks the capability to actually block the Strait of Hormuz, a key chokepoint. Thus, oil prices tend to spike on headlines and gradually fall thereafter.

OPEC+ continues to maintain production, and Trump has committed to cutting oil prices. These factors make the current rally unsustainable and likely short-lived.

Technically, the stock tested its resistance level in April and gapped down after management warned of weaker oil and gas prices impacting earnings. RSI has also climbed to 83, making a short-term or even deeper pullback very possible. Any new headlines pushing oil higher could offer another short opportunity.

Circle (CRCL)

The stablecoin story is appealing, but investors may be overly optimistic about Circle. The stock has soared more than 650% since its June 5 IPO. But several issues stand out:

• Circle’s USDC represents 24% of the total stablecoin market cap, while Tether’s USDT claims 61%. That implies Tether would be valued at ~$136 billion.

• Circle’s core business is issuing USDC, a dollar-pegged stablecoin. It uses the raised funds to purchase U.S. Treasuries—essentially a low-risk, low-return model. But investors could diversify on their own, making such an intermediary arguably unnecessary.

• Widespread stablecoin adoption is still uncertain. Investors are highly optimistic that stablecoins will disrupt traditional card networks like Visa and Mastercard. However, those networks maintain symbiotic relationships with merchants, making stablecoin disruption harder than expected.

• Circle has a 50% revenue-sharing agreement with Coinbase, but Circle's market cap is about 68% that of Coinbase—suggesting either Circle is overvalued or Coinbase is undervalued.

Circle’s RSI closed last Friday near 93, not unprecedented given past meme stock hype. Still, a gradual short position may be wise. A good hedge could be long Coinbase and short Circle, considering the large valuation gap.

Broadcom (AVGO)

Broadcom is another chip name showing both technical and fundamental weakness. Following its Q1 post-earnings tumble, shares have remained in a consolidation phase, and investors are looking for direction. However, as this range nears its end, the stock still struggles to reclaim previous highs due to a lack of fresh catalysts—creating a potential lower-high pattern.

Unlike Nvidia, Broadcom develops customized chips for large AI firms. Given the existing long-term contracts with major clients, investor enthusiasm seems muted, making a pullback increasingly likely.