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3 Stocks in an Overbought Market

(The following commentary comes from an independent investor or market observer as part of TheStreet's expert contributor program.) "It's only when the tide goes out that you learn who's been swimming naked." -- Warren Buffett.

NEW YORK (TheStreet -- If you believe that a "rising tide lifts all boats" then you will appreciate that the opposite also holds true. Sir Isaac Newton referred to this as "for every action there is an equal or opposite reaction.

There is unquestionable truth in this theory when applied to the stock market, as evident by the recent declines that we have seen upon the conclusion of the first trading week in the second quarter following the bullish run that we enjoyed in the first quarter.

When it comes to stocks, we need to understand that a strong economy can propel even the most challenged business models. In this article, we are going to look at a few stocks that might be on the verge of further pullback and ways to possibly mitigate some risk and exposure to losses.

The benefit of this is that if you are on the sidelines, hopefully you will be able to get an idea for a possible good entry point.

As of this writing, there have been close to 500 separate stocks that have recently reached new 52- week highs, including names such as Apple (AAPL) and IBM (IBM) and there are another 100 or so stocks such as Sirius XM (SIRI), Microsoft (MSFT) and Intel (INTC) that are mere%age points away from setting new highs.

So essentially there are almost 700 separate stocks that either have reached new 52 week highs this year or are close to it - these are the highest reported totals since July of last year. As great as these numbers are, the first couple of weeks of trading in Q2 suggests that this is not going to last.

Aside from Apple, looking across all of the indices, the signs of being overbought are apparent on a great majority of the stocks that have recently shown such momentum.

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