Intel Corporation (NASDAQ:INTC) shares are trading sideways on Friday. This comes after an epic rally. They have gained more than 150% since April 1.

But they may be on the verge of a reversal. We have made Intel our Stock of the Day.

When stocks hit price levels that had been important in the past, traders pay attention. Price levels that were important can become important again. They also pay attention when levels of momentum reach extremes.

Each of these circumstances presents opportunities for profitable trades.

The recent rally in Intel has brought the shares to historic extremes. They may be on the verge of a significant reversal.

‘Overbought' is a term traders use to describe a stock's momentum. Momentum is a measurement of how far a stock has moved in a given period of time.

Most of the time, a stock stays within its historical or normal price range. If emotional and aggressive buyers push the price above this range, traders say it is overbought.

Intel's stock has traded since 1972.

The lower part of the chart is the Relative Strength Index (RSI). It is a tool traders use to measure momentum. If the blue line is above the red line, it indicates overbought conditions.

Based on the weekly time-frame, Intel's shares are the most overbought that they have ever been.

Stocks that go up fast can move down fast if and when they reverse. Successful traders know that it is virtually impossible to catch the top. There is an old Wall Street saying that ‘the only people who can catch the bottom and top are liars.'

These traders know overstretched stocks can keep moving higher for longer than anyone can predict. So they wait for the reversal to begin before taking a position.

They will be watching Intel closely. It may be on the verge of a large reversal.

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