Q4 Caution: Weak Sectors to Scrutinize

by Ken Trester | October 2, 2012 11:58 am

Q4 Caution: Weak Sectors to Scrutinize

While some of the weakness during the last week of September can be attributed to large traders taking profits in front of the end of the quarter, if the major indices can’t keep things going this week, it could be a portent of a tough month upcoming.

Our analysis already shows several sectors are giving initial warning signals. I’ll share a few of the “lowlights” with you:

Some of the big players in the aerospace and defense arena indicate a potential slowdown. Boeing (NYSE:BA[1]) is rated as a problem stock, while both General Dynamics (NYSE:GD[2]) and Lockheed Martin (NYSE:LMT[3]) are quiet. My system shows Northrop Grumman (NYSE:NOC[4]) as “guarded” and United Technologies (NYSE:UTX[5]) is trending down.

In fact, airlines seem to be losing altitude, as well: JetBlue (NASDAQ:JBLU[6]) is a reconfirmed sell, and even industry favorite Southwest Airlines (NYSE:LUV[7]) is noted as a problem stock.

Even at the ground level, railroads are emerging as a sector that’s struggling. Norfolk Southern (NYSE:NSC[8]) and CSX (NYSE:CSX[9]) are rated among the weakest, and Union Pacific (NYSE:UNP[10]) is noted as a problem stock.

Outside of the transportation sector, chemicals could also setting up to take a hit. Air Products & Chemicals (NYSE:APD[11]), Tyco (NYSE:TYC[12]) and Dow Chemical (NYSE:DOW[13]) are all trending down. E. I. du Pont de Nemours and Company (DuPont) (NYSE:DD[14]) is squeaking by with a rating of quiet, but that’s hardly promising.

It also seems the back-to-school boost won’t be enough for many top-of-mind retailers, including J.C. Penney (NYSE:JCP[15]) and Nike (NYSE:NKE[16]), which are both on sell watch. Also watch out for Nordstrom (NYSE:JWN[17]) and Best Buy (NYSE:BBY[18]), two problem stocks.

Software isn’t a safe haven, either. Microsoft (NASDAQ:MSFT[19]) and NetApp (NASDAQ:NTAP[20]) are both on sell watch, and CA, Inc. (NASDAQ:CA[21]) is trending down.

And, of course, I’ve been warning against the semiconductors[22] for a few weeks now, and the near-term outlook hasn’t improved there.

While none of these stocks have revealed a suitable options trade at the moment, the start of a new quarter is always a great time to re-evaluate your holdings. If you currently own any of these names or intend to purchase them soon, be sure to put them through a vigorous filter first.

Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973.

Endnotes:
  1. BA: http://studio-5.financialcontent.com/investplace/quote?Symbol=BA
  2. GD: http://studio-5.financialcontent.com/investplace/quote?Symbol=GD
  3. LMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=LMT
  4. NOC: http://studio-5.financialcontent.com/investplace/quote?Symbol=NOC
  5. UTX: http://studio-5.financialcontent.com/investplace/quote?Symbol=UTX
  6. JBLU: http://studio-5.financialcontent.com/investplace/quote?Symbol=JBLU
  7. LUV: http://studio-5.financialcontent.com/investplace/quote?Symbol=LUV
  8. NSC: http://studio-5.financialcontent.com/investplace/quote?Symbol=NSC
  9. CSX: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSX
  10. UNP: http://studio-5.financialcontent.com/investplace/quote?Symbol=UNP
  11. APD: http://studio-5.financialcontent.com/investplace/quote?Symbol=APD
  12. TYC: http://studio-5.financialcontent.com/investplace/quote?Symbol=TYC
  13. DOW: http://studio-5.financialcontent.com/investplace/quote?Symbol=DOW
  14. DD: http://studio-5.financialcontent.com/investplace/quote?Symbol=DD
  15. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  16. NKE: http://studio-5.financialcontent.com/investplace/quote?Symbol=NKE
  17. JWN: http://studio-5.financialcontent.com/investplace/quote?Symbol=JWN
  18. BBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBY
  19. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  20. NTAP: http://studio-5.financialcontent.com/investplace/quote?Symbol=NTAP
  21. CA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CA
  22. warning against the semiconductors: http://investorplace.com/2012/09/put-down-your-semiconductor-stocks/

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