7 consecutive weeks of gains, so where’s the opportunity?

Stocks are up, but could they start coming back down?

Investors continued to defy concerns over debt levels in the United States as well as the potential easing of stimulus by the US Federal Reserve, sending the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) upwards for the seventh consecutive week last week.

The gains were predominantly recognised in the retail and energy sectors. Despite having announced a 5.9% fall in annual net profit, David Jones’s (ASX: DJS) report returned an element of confidence to the market after announcing its intention to increase online sales. Wesfarmers (ASX: WES) and Woolworths (ASX: WOW) also added 0.5% and 1.5% respectively, whilst JB Hi-Fi (ASX: JBH) appreciated an incredible 8.3%.

In the energy sector, Origin Energy (ASX: ORG) gained 1.3% and Linc Energy (ASX: LNC) leaped 10.6% from $1.425 to $1.575 per share.

A number of other blue chips also pitched in to the gains, aiding the benchmark index upwards to sit at 5307.1 points at close on Friday. Westpac (ASX: WBC), ANZ (ASX: ANZ) and NAB (ASX: NAB) all finished the week in the black, whilst Telstra (ASX: TLS) hit the $5 mark for the first time since mid-August to finish at $5.02 for the week.

Foolish takeaway

Whilst the index is sitting at over 5300 points, many stocks have become overpriced compared to long-term potential, however, after seven consecutive weeks of gains, it is possible that we will see investors start taking profits. which would give long-term investors a prime opportunity to buy.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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