Positive economic and earnings gains have driven the Dow to its highest level since May 2 and the highest level on the S&P 500 since July 21. The news that got the most attention was from the unemployment index, which fell to 8.3% — a three-year low.
Technically, the major indices have broken into bull-market trends after executing golden crosses. A golden cross is the intersection of the 200-day moving average by the 50-day moving average and is generally accepted as a “long-term validation of a rally.” According to Birinyi Associates, stocks have averaged a 6.6% gain following 26 golden crosses that have occurred since 1962.
The future appears bright even after a run of over 15% from its November lows by the broad-based S&P 500 since many companies have huge cash positions. And even after the recent advances the index is still 13.5% below the October 2007 high.
But some stocks that have participated in the advance have diminished potential for future appreciation. It is primarily those stocks with limited price potential that are excellent candidates for the production of cash to be reinvested following an expected round of profit-taking.
Here is our list of stocks to sell in February: