The bull market is still very much alive, but it appears that a broad market correction has begun. Savvy investors should cull their portfolios for stocks to sell while making a list of those that they would like to buy on a pullback.
With first quarter earnings beginning this week amid reports that they will not match last year’s second half, what should investors sell in order to raise cash to take advantage of a 5%-plus correction?
Basically you should sell anything that has not responded to this year’s impressive “jump from the gate,” starting with our list of stocks to sell in April:
Stock to Sell #1 – AngloGold Ashanti Ltd. (AU)
Gold-mining stocks followed the metal to a 12-week low as a result of a disappointing Spanish bond auction and a renewed flight to the U.S. dollar. But even before that AngloGold Ashanti Ltd. (NYSE:AU) was expensive versus its peers with a price/earnings ratio at 10.37. To compare, Barrick Gold (NYSE:ABX) is at 8.67 times earnings and Anglo American (PINK:AAUKY) is at 7.46.
Technically AU broke from a consolidation in early March that had bracketed its 50-day and 200-day moving averages for over nine months. On April 4, the stock broke down on a continuation gap at $34.63, indicating that the stock will probably head lower.
However, the precious metals group is now oversold and due for a correction rally (up). Therefore, holders of AU would be wise to sell the stock on a rally.
Stock to Sell #2 – Chesapeake Energy Corp. (CHK)
Chesapeake Energy Corp. (NYSE:CHK) is the second largest producer of natural gas and the most active driller of new wells in the United States. Thus, it has been seriously impacted by lower natural gas prices. Earnings are expected to fall to $2.30 in 2012 versus $2.88 in 2011.
The stock fell from about $36 in July 2011 and appeared to be making a bottom when in March of this year it broke its downtrend line. This, however, seems to be a false breakout. The turn from its 200-day moving average while forming a double-top is very bearish. Sell CHK at the market.
Stock to Sell #3 – CONSOL Energy (CNX)
CONSOL Energy (NYSE:CNX) has been in a bear market since March 2011. It is the leading developer of bituminous coal in the Appalachian Basin with enormous reserves. However, increased government regulation that limits the use of coal as an energy source has resulted in erratic earnings and a downward spiral in the price of its stock.
Since early last year, CNX has been trading in a bear channel with a target of under $28. Recently the stochastic issued a new sell signal following a shallow rally. Shareholders should use the rally to sell CNX.
Stock to Sell #4 – Oracle Corp. (ORCL)
But as our InvestorPlace adviser Louis Navellier says, “What really keeps this stock down is its depressed level of buying pressure.”
Technically Oracle is in a bear market. Each attempt to rally falls short of holding above its 50-day and 200-day moving averages. Volume has been a strong negative. Sell ORCL at market.
Stock to Sell #5 – Federal-Mogul Corp. (FDML)
Federal-Mogul Corp. (NASDAQ:FDML), a major supplier of parts, components, modules, and systems to auto, engine, marine, railroad, and other heavy industries, had an earnings loss of 91 cents in 2011 versus a profit of $1.62 in 2010.
On a recent rally the stock failed to hold above its 50-day and 200-day moving average as huge selling drove the stock back into a bear market, and even though the stochastic is oversold it could remain oversold for an indefinite period. Sell at market.
Stock to Sell #6 – Wells Fargo & Co. (WFC)
Wells Fargo & Co.’s (NYSE:WFC) Q3 results hit record highs for net income and EPS, but trading resulted in a lower net interest margin. S&P estimates earnings for 2011 to total $2.82 and $2.97 in 2012. At just 11 times earnings, the stock should sell at $32 since it has commanded a higher multiple in the past.
But the stock is range-bound between $24 and $35, and the long-term (weekly) chart is showing a bearish flag forming. Sell WFC or take defensive action. The chances are high that the stock will pull back to the mid-$20s.