by Sam Collins | June 4, 2012 5:52 pm
May has traditionally not been kind to stockholders, and this May was especially cruel. The S&P 500 was off 6.3% for the month. In addition, this year the benchmark indices have broken down technically, putting the near-term and intermediate-term market trends sideways.
There was clear support at the following zones: S&P 500 1,293 to 1,264, Dow 12,100 to 12,300, and Nasdaq 2,737 to 2,775. But each has been broken on heavy selling confirming a downtrend in the short and intermediate term.
Even though the long-term bull market is intact, it is time to sell those stocks that have a weak fundamental and technical future.
Here is our list of stocks to sell in June:
AK Steel Holding Corp. (NYSE:AKS) is a producer of flat-rolled carbon, stainless and electrical steel products for the automotive, appliance, construction and electrical power industries.
This company is extremely cyclical and lost money in each of the past three years. A strong economy could turn it around, but projections call for more of the same poor results.
Technically the stock has been in a bear market since January 2010. The recent breakdown from a triangle and the stochastic sell indicate that AKS will head further south before making a bottom.
Celanese Corp. (NYSE:CE) is a producer of industrial chemicals, engineered plastics and acetate fibers. Because of its international nature, it could be highly sensitive to a global recession. Higher-than-expected raw material costs add to its risk.
The stock is in an intermediate downtrend, but the recent break from its 200-day moving average on a breakaway gap is a bad technical signal. Its near-term target is $33, but it could be heading into a long-term bear market. Sell CE at the market.
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.
A big quarterly earnings miss resulted in a revision of annual estimates to 76 cents from $1.79 in 2012, and $2.82 versus $3.52 in 2013.
The stock has been falling in a well-defined bear channel since August. Then, in early May, it fell through the bottom of the bear channel, rallied back through the bottom of the channel, and appears ready to head lower again. Sell CHK on this recent rally.
Scientific and technical instruments designer and manufacturer Emerson Electric Co. (NYSE:EMR) issued fiscal Q2 results that widely missed analysts’ targets. Weak economic conditions in China and Europe were blamed for the miss. Analysts have lowered their projections for 2012 and 2013.
Technically EMR broke down from a double-bottom with a gap on huge downside volume. Support exists in the low $40s and that is our target for a short sale. Stop-loss orders should be entered at $50.
As with all short sales, be sure to check with your broker for the ability to borrow the stock. Short-selling is a speculative technique that involves higher-than-normal risk.
McGraw-Hill Companies (NYSE:MHP), a leading global financial information and education company, plans to spin off its education business. But costs of the separation are high, and exposure to litigation and possible loss of market share are factors that could have a long-term negative impact on the price of the separated companies.
Technically the stock broke down from its 200-day moving average on high volume and is now in a long-term bear market. Sell MHP at the market.
Sony Corp. (NYSE:SNE), a world leader in consumer electronics, filmed entertainment, games and financial services, has fallen on hard times. Analysts expect a loss this year of $5.55, which exceeds the losses in each of the past three years.
The economy has been slow to recover, and the widespread consumer malaise is expected to continue through 2013.
The stock is in a sharp downtrend with heavy selling in the past month. There is no obvious bottom to this stock and selling at the market is the best course of action.
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