Historically speaking, September is the worst-performing month of the year for stocks, but this year, it turned in an outstanding performance. Due to stimulation from the Fed, Europe, and China, the S&P 500 rose 2.4% with energy, technology and telecommunications sectors leading the way, each up over 7%.
Following a major technical breakout, stocks usually experience a short (one-to-three-week) consolidation and then pick up the trend by shifting to sectors that lagged. But stocks that have totally failed to participate in the market’s five-month rally are not likely to recover.
This month, all of the stocks on the sell list are in serious fundamental and technical trouble or are overvalued with certain political risks. Here is our list of stocks to sell in October:
Stock to Sell #1 – Anadarko Petroleum Corp. (APC)
Anadarko Petroleum Corp. (NYSE:APC) is one of the largest independent oil and gas exploration and production companies in the world. However, it has an aggressive financial profile that limits its profit potential in periods of heightened political and economic risk. Since it is more dependent on higher oil and gas prices for an increase in earnings, and analysts are predicting lower prices in the next six months, there is a mixed opinion as to the near-term outlook for APC.
Technically, the stock rose 35% from its June low to over $76, but could not hold above its 200-day moving average. A close under the support line at $69 will likely target a decline to below $60. The MACD issued a sell signal in September, and sellers appear to be accumulating. Sell APC at the market if it closes under $69.
Stock to Sell #2 – Community Health Systems (CYH)
Community Health Systems (NYSE:CYH), which owns and operates 131 hospitals, 63 licensed home care agencies and 30 licensed hospice agencies, has been downgraded by several research analysts. On Sept. 21, S&P lowered its rating from a “hold” to a “strong sell,” saying that the stock was overvalued after advancing 65% year to date and trading above their target.
CYH has higher-than-average debt, and revenues for 2013 are expected to be at the lower end of estimates.
Technically, the stock recently fell from a resistance line at $30-$31. Its next support is at the 200-day moving average at $23.54, and if it breaks it, then the target would be the June low of $20-$21.
Stock to Sell #3 – ITT Educational Services (ESI)
ITT Educational Services (NYSE:ESI) provides postsecondary degree programs in the United States. As of December 2011, it had 144 locations where it offers 73,000 students bachelor’s, master’s, associate and career-oriented education programs. Due to rising uncertainty about ITT’s existing and potential off-balance sheet, third-party student lending programs/liabilities, and relatively inferior free cash flow, the stock has been downgraded by analysts.
Technically, ESI has been in a bear market since February 2009, but a recent break of support at $30 implies that the stock is headed lower. MACD issued a sell signal and selling is picking up again. The near-term downside target is $22.
Stock to Sell #4 – The Mosaic Company (MOS)
The Mosaic Company (NYSE:MOS), a producer and marketer of phosphate and potash crop nutrients, missed its fiscal Q1 earnings estimate. Deutsche Bank analysts note that “the company stated that 2H12 China potash contracts will likely settle down,” meaning that nutrient demand from this major customer is falling. Analysts have cut their earnings estimates and price targets.
Technically, the stock failed to hold above a triple-top at around $60 and is currently challenging support at its 200-day moving average at $54.50. Selling is picking up, MACD issued a sell signal, and if the stock closes under its 200-day moving average, it will most likely fall to its annual low of just over $44.
Stock to Sell #5 – QLogic Corp. (QLGC)
QLogic Corp. (NASDAQ:QLGC) designs and supplies network infrastructure products that provide and manage computer data communication. Earnings fell in three of the past four quarters from comparable year-ago periods, and analysts’ estimates for next year are mixed.
Technically, the stock is in a bear market with resistance at just over its bearish resistance line at $12. In early October, it broke a temporary support line at $11 as distribution increased. MACD flashed a sell signal in mid-September. Sell QLGC with a downside target of $8.50.
Stock to Sell #6 – Tech Data Corp. (TECD)
Tech Data Corp. (NASDAQ:TECD) is one of the world’s largest distributors of microcomputer hardware and software products to retailers. The company’s exit from Brazil and Columbia, a general global softness in demand, and overdependence on southern Europe, all put pressure on revenues and earnings.
Technically, the stock broke down from a support line at $46 in late September. This confirms a bear market is still in place with a downside target in the mid-$30s. MACD is oversold, and so there may be a bounce shortly but traders and current shareholders should sell into strength.