6 Sinking Stocks to Abandon Now

They say a rising tide floats all boats, and that certainly seems to have been the case in the past two months, with the broad-based S&P 500 up over 14%. But with the election behind us, most Q3 earnings reported, and the Fed’s QE2 decision made public, it is time to review your portfolios for laggard stocks that should be sold. 

All of the stocks on this list have two things in common: They have failed to keep up with the herd by continuing in downtrends, and they are still below their 200-day moving averages. If you own any of these names, the market is giving you the perfect opportunity to exit. Or, if you can handle the risk, then consider short-selling.

It seems that each new product offering from BlackBerry maker Research In Motion Limited (NASDAQ: RIMM[2]) is upstaged by rival Apple Inc. (NASDAQ: AAPL[3]). RIMM managed a reaction rally in July, but it ran into a wall at the 50-day moving average and rolled into a new channel down. The recent rally has bounced RIMM to just under its 200-day moving average where it should be sold or sold short with a downside target below $38. 

Short-selling[4] is a speculative technique, so traders should enter stop-loss orders. Also, check with your broker for margin requirements and the ability to borrow stock. Naked short-selling (selling without first borrowing stock) is illegal.

Software company Adobe Systems Incorporated (NASDAQ: ADBE[6]) completed a bearish rounding top in May. Despite bullish opinions from some major research firms, the implication of this breakdown gives a target in the low $20s. From a technical perspective, the recent rally to the $30 area provides a good opportunity to sell this stock. 

Traders should consider short-selling ADBE. But please check with your broker to confirm that you are able to borrow shares before selling short. And place a buy stop at a higher price than your selling price to protect against extreme loss.

BP Plc (NYSE: BP[7]) has a "high risk profile," according to Standard & Poor’s. Following the disastrous Gulf of Mexico oil spill, the stock managed to recover from its low under $27 and rally to the 200-day moving average[8]. This line should provide resistance to a further advance. Additionally, at $44 the recovery will have retraced 50% of its total decline — another major barrier.

Those who have held BP throughout the crisis now have the opportunity to sell and reinvest their capital in a higher-growth asset. (See 10 Crude Oil Blue Chips to Sell[9].)

Global financial services provider Barclays Plc (NYSE: BCS[10]), which engages in retail banking, credit cards, corporate and investment banking, and wealth management, is still suffering from the impact of the global financial crisis. 

The stock is in a broad channel downtrend with resistance at the 200-day moving average at $19.25. While distribution continues at such a steady pace there is little chance of a recovery. Sell now and put the proceeds to work in a better opportunity.

Barnes & Noble, Inc. (NYSE: BKS[11]), which operates more than 1,300 bookstores, is under extreme pressure from competitive e-book sales, as well as diminishing profits from its own e-book margins. Credit Suisse says there is a "direct technological attack on its core business." 

From a technical perspective, the stock is in a sharp decline and recently broke down from a small head-and-shoulders pattern and a failed stochastic buy signal. Currently trading around $15, the stock’s downside target is $11.

Homebuilder and mortgage finance company The Ryland Group, Inc. (NYSE: RYL[12]) has fallen from over $80 a share five years ago to around $16 today. The stock made good progress in 2009, climbing from $10 to over $26 by April 2010, only to be overcome by poor sales and earnings. 

In the past week, RYL popped back to its 50-day moving average, but Q3 profits missed by a wide margin, so the stock should be sold here.

The Dirty Dozen: 12 Big-Name Stocks to Sell Now — Shrinking margins, bleak revenue outlooks, increased competition and slow growth. At best, they will be dead money for a long time. At worst, they will drain your portfolio. Get their names in Hilary Kramer’s new report: "The Dirty Dozen." It’s yours FREE for a limited time. Click here to read it now.[13]