Are These 5 TOP Stock Performers Overbought?

On Tuesday, the Dow Jones Industrial Average (NYSEARCA:DIA) and S&P 500 (NYSEARCA:SPY) both declined about half a percent to finish the day in the red. However, both major indices managed to close higher for the second consecutive month. For July, the Dow gained 1 percent, while the S&P 500 increased 1.3 percent. In fact, the Dow has posted a gain for nine of the past 10 months.

While the markets in general appear to be waiting on central banks to make additional monetary actions, there have been several outperforming stocks in the S&P 500. Bespoke Investment Group, a money management and research firm, recently conducted a stock screen of stocks that are currently trading the farthest above their 50-day moving averages. This average is a popular technical indicator that is often used to analyze price trends.

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Listed below are the top five stocks in the S&P 500 that are the farthest from their 50-day MA, with their corresponding distance above the average shown as a percentage.

Sprint Nextel (NYSE:S):  41.82 percent

MetroPCS Communications (NYSE:PCS):  37.75 percent

Western Digital (NYSE:WDC):  24.81 percent

Constellation Brands (NYSE:STZ):  22.43 percent

Cablevision Systems (NYSE:CVC):  20.26 percent

July has been characterized by the weak financial results during earnings season. Companies seem to be meeting or exceeding bottom line estimates, but top line figures have been less than stellar to the say the least. Interestingly, the top three S&P 500 components trading above their 50-day MA all reported revenue numbers that beat analyst estimates. Sprint reported a 6.4 percent increase in revenue from last year to $8.84 billion, beating estimates of $8.73 billion. Meanwhile, MetroPCS revenue rose 5.9 percent to $1.28 billion, topping estimates of $1.26 billion. Western Digital almost doubled its revenue to $4.75 billion, as the company recovered from severe flooding.

Although these companies may continue to outperform, investors may want to consider taking some profits off the table as August begins. Bespoke notes that since 1990, the S&P 500 has averaged a decline of 1.05 percent for August. “In August 2010, the index fell 4.74 percent, while in 2011 the S&P 500 dropped 5.68 percent,” the firm explains.

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