To The Moon

$SoFi Technologies Inc.(SOFI)$

For much of 2025, markets have been on an unstoppable run, with risk-on assets charging higher, volatility subdued, and retail traders showing renewed enthusiasm for growth names. Yet even in the strongest bull markets, certain stocks begin to look overextended, leaving investors asking: is this momentum sustainable, or is it a sign of greed overtaking discipline?

One stock that perfectly captures this dynamic is SoFi Technologies (SOFI). After surging to $26 per share, SoFi has begun to pull back from those highs—a pattern the stock has repeated multiple times before. The retreat doesn’t necessarily spell the end of its bull case, but it does highlight the need to reassess how investors should handle stocks that start flashing overbought signals.

More broadly, the market’s strength raises a deeper question: which stocks are truly overbought, and how should investors manage positions in this late-stage bullish cycle?

SoFi at $26: A Familiar Resistance

For those following SoFi, the $26 level has emerged as an important technical battleground. Historically, when the stock pushes toward this zone, it tends to encounter profit-taking pressure, stalling momentum and forcing a retracement.

From a technical analysis standpoint:

• The Relative Strength Index (RSI) for SoFi hit the high 70s before easing—a level commonly considered overbought.

• Trading volumes spiked during the rally, suggesting speculative buying, followed by sharp reversals.

• Options activity showed an increase in short-term call buying, another sign of momentum chasing.

This doesn’t necessarily mean the rally is over. In many cases, consolidations at key levels serve as setups for eventual breakouts. But it does highlight the short-term risks of chasing price action when a stock approaches its historical ceiling.

Fundamentals vs. Technicals

Looking under the hood, SoFi remains a company with solid long-term growth prospects:

• Membership growth continues at a strong pace, with millions of new customers added each year.

• Revenue diversification is improving, with lending, financial services, and technology platform income contributing.

• Profitability metrics are gradually improving, with SoFi nearing consistent net income margins after years of reinvestment.

Yet, valuation tells a different story. At $26, SoFi trades at a premium multiple, especially when compared to traditional financial institutions. Bulls argue that SoFi is a tech-enabled disruptor deserving higher multiples; bears counter that profitability and returns on equity must eventually justify the optimism.

This clash between valuation concerns and growth enthusiasm is precisely why the stock often finds resistance at this level.

The Market Context: Greed vs. Momentum

SoFi’s pullback can’t be viewed in isolation. The broader market has been in what many analysts describe as a “greed phase”:

• Fear & Greed Index readings are near extreme optimism.

• VIX volatility index remains suppressed, reflecting little fear of downside.

• Margin debt levels have climbed, suggesting higher speculative risk-taking.

• Options flows skew heavily toward call buying, particularly in high-growth tech names.

The challenge is distinguishing between legitimate bullish momentum and dangerous excess. Historically, greed-driven phases don’t always end in immediate crashes, but they often create pockets of overvaluation that lead to sharp corrections when sentiment turns.

Which Stocks Look Overbought Now?

SoFi isn’t alone in showing signs of overheating. A number of high-profile names look stretched when viewed through a technical and sentiment lens.

1. Nvidia (NVDA)

• Trading near record highs with a forward P/E above historical norms.

• RSI levels consistently pushing into overbought territory.

• Despite strong AI-driven growth, some analysts warn the stock’s parabolic rise outpaces near-term fundamentals.

2. Tesla (TSLA)

• The stock’s rebound has been fueled more by short covering and momentum than earnings upgrades.

• Valuation remains aggressive compared to automaker peers.

• Retail enthusiasm continues to drive volatility, keeping it prone to sharp swings.

3. Coinbase (COIN)

• Rallied alongside Bitcoin’s resurgence.

• Volatility is extremely high, and RSI has moved into the danger zone multiple times.

• A pure sentiment play on crypto prices, making it especially vulnerable if Bitcoin retraces.

4. Palantir (PLTR)

• Shares have extended higher after AI-related contract announcements.

• Valuation multiples have disconnected from actual revenue growth rates.

• A classic example of how narrative-driven momentum can outpace fundamentals.

In each of these cases, investors need to weigh long-term potential against short-term exhaustion.

Profit-Taking vs. Holding for Breakouts

One of the toughest questions investors face is deciding what to do when stocks approach prior highs.

• Taking profits: Locks in gains, reduces exposure, but risks missing further upside if the stock breaks out.

• Holding through resistance: Keeps exposure to upside momentum, but increases vulnerability to pullbacks.

Different investors handle this differently:

• Traders often use technical signals (RSI, moving averages, volume divergences) to time exits.

• Long-term investors focus on fundamental value, often ignoring technical ceilings.

• Hybrid approaches include trimming positions to reduce risk while maintaining a long-term core holding.

Investor Psychology: The Greed Cycle

Investor psychology plays a huge role in these decision points. The greed-fear cycle typically unfolds as follows:

1. Early optimism – Investors cautiously buy, valuations are still reasonable.

2. Momentum builds – More money flows in as stocks climb.

3. Greed phase – Valuations disconnect from fundamentals; investors rationalize stretched multiples.

4. Euphoria – Everyone believes “this time is different.”

5. Correction – Sentiment turns abruptly, often sparked by unexpected news.

Currently, markets appear somewhere between stage 3 (greed) and stage 4 (early euphoria). While that doesn’t guarantee an imminent collapse, it does suggest heightened vulnerability to shocks—whether from politics, central banks, or earnings disappointments.

Measuring Greed vs. Normal Momentum

How can investors practically measure whether a market is overbought due to greed, or simply in a healthy bullish trend?

• RSI & MACD indicators: Technical tools that measure momentum and exhaustion.

• Valuation multiples: Comparing current P/E, P/S, or EV/EBITDA ratios to historical averages.

• Options activity: Skewed call buying often signals retail-driven greed phases.

• Sentiment surveys: AAII Investor Sentiment, CNN Fear & Greed Index, and fund manager positioning reports.

• Breadth indicators: Narrow rallies led by a few mega-caps often signal fragility, while broad-based gains are healthier.

The more of these indicators align toward extremes, the greater the case for caution.

Strategies for Overbought Markets

So what’s the best way to position when markets feel overheated? A few strategies stand out:

1. Trim winners, redeploy into laggards – Lock in gains from stretched stocks and rotate into undervalued sectors.

2. Hedge selectively – Use options or inverse ETFs to protect against downside.

3. Build cash reserves – In greed-driven markets, cash optionality becomes more valuable.

4. Focus on fundamentals – Stay invested in companies with strong balance sheets and cash flow generation.

5. Avoid chasing – Buying parabolic rallies is often a losing strategy; wait for consolidations or pullbacks.

Key Discussion Questions

1. Which stocks in your portfolio do you think are overbought right now?

2. Do you usually take profits when a stock hits previous high levels, or wait for a breakout?

3. How do you measure if the market is in a “greed” phase versus just normal bullish momentum?

Conclusion: Caution Without Fear

SoFi’s pullback at $26 serves as a timely reminder: markets move in cycles of momentum and correction, and no stock climbs in a straight line. While the broader bull run remains intact, signs of greed are increasingly visible across growth-heavy names.

For disciplined investors, this is not a call to panic—but rather a signal to be more selective, manage risk, and avoid emotional chasing. Overbought markets can continue higher, but eventually, fundamentals always matter.

The key takeaway: recognize the difference between long-term conviction and short-term speculation. Locking in profits doesn’t mean abandoning the bull market—it simply means playing smart while others get caught up in greed.