Applied Materials, Inc. (NASDAQ:AMAT) shares are rising on Tuesday. The move comes after positive comments from a brokerage firm.

We have made Applied Materials the Stock of the Day. The upside momentum has reached historic levels.

If a stock is driven above its typical or normal range by emotional and aggressive buyers, traders say that it is ‘overbought’.

This could be an important dynamic. Many trading strategies are based on the concept of reversion to the mean. If a stock is overbought, traders will enter the market as sellers.

They will be anticipating a reversion or move lower. Their selling could put pressure on the stock.

The lower part of the chart is the Relative Strength Index (RSI). If the blue line is above the horizontal red line, it indicates overbought conditions. As you can see, that is the case now.

The indicator uses a weekly timeframe. Based on this perspective, Applied Materials is the most overbought it has ever been in the 53 years it has been publicly traded.

Savvy traders pay attention when metrics reach historic extremes. Historic extremes can be followed by historic moves.

Today’s move follows positive comments from a brokerage firm. Investors often note that sell-side research skews bullish: historically, only a small share of Wall Street ratings are sells, with the rest holds or buys.

Nobody can know for certain where the Applied Materials rally will end. But some traders are cautious because they expect the reversal to happen soon.

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