Overbought Stocks: IREN Limited, Kratos Defense & Security, and Their Potential for a Short-Term Pullback

Three stocks, IREN Limited, Kratos Defense & Security, and Rocket Lab USA, have become overbought according to the Relative Strength Index (RSI). IREN's RSI recently reached 82, while Kratos Defense & Security's RSI is at 87.2. The stocks have surged due to the AI boom and renewed Bitcoin strength, as well as excitement in the defense sector. Valuation metrics are stretched, and a technical pullback appears likely.

The Relative Strength Index (RSI) is a popular technical indicator used to gauge the speed and change of price movements. Recently, three stocks— IREN Limited (NASDAQ: IREN), Kratos Defense & Security (NYSE: KDS), and Rocket Lab USA (NASDAQ: RKLB)—have become overbought, with their RSI values exceeding 70. Specifically, IREN's RSI reached 82, Kratos Defense & Security's RSI is at 87.2, and Rocket Lab USA's RSI is at 84.5.

These stocks have surged due to the AI boom and renewed Bitcoin strength, as well as excitement in the defense sector. However, their high RSI values suggest that they may be overvalued and ripe for a technical pullback.

IREN Limited, formerly known as Iris Energy Limited, operates bitcoin mining data centers. The company has seen significant institutional buying, with several large investors increasing their stakes in the first quarter of 2025. The company's stock has also experienced insider selling, with CEO Daniel John Roberts selling 1 million shares in September 2025. Despite these activities, IREN's stock has shown strong performance, with a 186% year-to-date gain and a consensus rating of "Moderate Buy" from analysts SLT Holdings LLC Acquires New Shares in IREN Limited $IREN^[2].

Kratos Defense & Security is a leading provider of advanced technology solutions for defense and security. The company's stock has also seen significant institutional buying, with several large investors increasing their stakes in the first quarter of 2025. Kratos' stock has been boosted by renewed interest in the defense sector and the AI boom. However, its high RSI value suggests that it may be overvalued and ripe for a pullback.

Rocket Lab USA is a space technology company that designs, manufactures, and launches small satellites. The company's stock has been boosted by renewed interest in the space sector and the AI boom. However, its high RSI value suggests that it may be overvalued and ripe for a pullback.

Investors should be cautious with these overbought stocks and consider waiting for a pullback before entering long positions. Additionally, investors should monitor the broader economic signals and recession risks in the United States, which may impact these stocks' performance.