The bull may be back, but not all stocks are headed up
Oct 1, 2010, 11:59 am EDT | By Sam Collins, InvestorPlace Chief Technical Analyst
Trade These Stocks in for Some Winners
It looks like the bull may be back! On Oct. 5, the major indices broke through resistance that has held back buyers for more than five months. This puts the market back on the offensive, and investors should be, too.
But some stocks either did not participate in the September advance or are so overpriced that profits should be taken. Here are six stocks to sell and either hold the cash or invest in a good quality stock that will participate in a general market advance.
Stock to Sell #1: Akamai Technologies (AKAM)
Akamai Technologies, Inc. (NASDAQ: AKAM) is a developer of solutions designed to accelerate and improve the delivery of Internet content.The stock has more than doubled in one year and jumped 43% in the past seven weeks. With a price/earnings ratio of 59 times 2010 earnings, and the stock selling at more than 35% above its 200-day moving average, it appears time to cash in this high performer and nail down a profit.
Technically AKAM is in a powerful bull market, but a small top is forming and a close under $50 could result in a quick drop to $40 to $45. S&P rates AKAM a “two-star sell.”
Aluminum producer Alcoa Inc. (NYSE: AA) is still in a bear market. Ford Research downgraded the stock on Sept. 24 to a “sell” based on a “very negative” earnings trend over the past five years. Technically the recent rally failed to reach the stock’s 200-day moving average, and the stochastic is overvalued. Alcoa has regularly underperformed the market and its competition. Sell AA at market.
McKesson Corporation (NYSE: MCK) offers medicines, pharmaceutical supplies, and information and care management products and services for the health care industry.The stock has not kept pace with the market and is still in a downtrend. Its relative strength is bearish, there are sellers on balance, and the stochastic recently flashed a sell signal. Sell MCK at market.
The major agricultural chemical firm Monsanto Company (NYSE: MON) double-topped in July 2009 and January 2010. It then executed a “death cross” in March, and has been in a bear market since that time. Following a two-month rally, our proprietary indicator, the Collins-Bollinger Reversal (CBR), flashed a sell at over $60 in July, and the stock promptly fell 10 points. Recent heavy selling and poor earnings continue to put pressure on the stock. Sell MON at market.
Panera Bread Company (NASDAQ: PNRA) is the franchiser of 1,400 bakery-cafes. The stock has been a super performer; however, at 25 times 2010 earnings it is overvalued compared to its peer group, according to Standard and Poor’s. S&P rates PNRA a “two-star sell.” Technically the stock appears to have double-topped and recently flashed a sell signal from our internal indicator, the CBR, as well as from the stochastic. Sell PNRA at market.
Leading coffee retailer Starbucks Corporation (NASDAQ: SBUX) has done well by shareholders, doubling in price in one year. However, with the price of coffee dramatically increasing and close to a 13-year high, earnings are under pressure, according to S&P, which now rates the stock a “two-star sell.”Technically SBUX has broken its bullish support line, received a sell from the stochastic, and is close to issuing a “death cross.” It is time for holders of Starbucks to cash in their profits.