Bank of America’s technical strategists issued a fresh warning to clients Monday: the Nasdaq 100’s rally has stretched too far, too fast, and the risk-reward balance for tech stocks is deteriorating. The Nasdaq 100 broke above 30,000 recently, but BofA says the index has moved beyond expectation and warns that the 14-week Relative Strength Index has hit overbought territory, a classic signal that upward momentum is running low on fuel. The bank’s strategists are telling clients it is time to start managing risk of a pullback rather than chasing new highs.
The warning comes with specific numbers investors should track. BofA has flagged 28,567 as the critical threshold to watch, a level that would represent roughly a 3% decline from Tuesday’s levels and would mark a new four-week low for the index. Breaking below that level, the analysts say, would signal a retest of the 2025 highs. Chip stocks, which have led the broader tech rally, are flashing particularly stretched readings. BofA specifically called out the VanEck Semiconductor ETF as an example of overbought conditions, noting that when its RSI weakens below a key technical level, history shows the sector tends to enter a period of higher volatility and potentially a deeper correction. The bank’s technical view aligns with its broader defensive positioning call and reflects belief that the risk-reward balance has shifted unfavorably for tech bulls.
For retail investors holding tech-heavy positions, BofA’s warning is a prompt to review concentration risk. The practical move is not necessarily to sell everything, but to assess how much of your portfolio is tied to a sector that has surged dramatically over the past year. Steps worth considering include trimming outsized positions in individual semiconductor names that have run well beyond fundamental price targets, rotating some exposure into defensive sectors such as healthcare or consumer staples, or using diversified sector ETFs rather than concentrating in the highest-fliers. BofA is not calling for a crash. The key support level at 28,567 remains close enough that a brief dip and recovery is still the base case. But in a market where Treasury yields are rising and the Fed is signaling potential rate hikes, having some cushion against a tech correction is prudent risk management for any retail investor.
