by Sam Collins | March 5, 2013 7:28 am
The stock market’s outlook has changed with the near-term trend now uncertain. The first-of-the-month syndrome, which in January and February resulted in big gains for the major indices, fizzled on March 1. Small gains were accompanied by only average volume, whereas in January and February, triple-digit gains were accompanied by higher volume and breadth. But the bull market is still intact, and any pullback of 3% to 5% will provide both traders and investors with excellent buying opportunities.
Uncertainties are heightened by headline news, predominantly associated with “sequestration,” and that has kept many investors out of the market. But the S&P 500 has so far held above the psychologically important number of 1,500; however, the real support for the index is at 1,475. A breakdown from that zone could quickly threaten the intermediate uptrend, and if it becomes extended, could even have an impact on the major bull market advance.
For stocks to succeed in an uncertain and overbought market, the fundamental and technical outlooks for each must be ideal. The stocks on this list do not meet those requirements, and in fact, each one is seriously flawed and in danger of a sharp sell-off.
Here is our list of stocks to sell in March:
Leading consumer electronics retailer Best Buy (NYSE:BBY) is slipping despite its 4,300 stores and broad name recognition. Intense competition from online retailers and thin operating margins have contributed to a sharp downturn in the stock. Even though Q4 earnings beat analysts’ estimates by $0.10, earnings estimates for next year are flat and insider selling is high.
Technically, the stock is in a bear market. In late October, its price fell through a quadruple support line at $17 before finally making a bottom at about $11.50. A recovery rally has taken the stock back to major resistance at $17-$18.50. MACD flashed a sell signal in late February.
Sell BBY if you own it. Traders should sell it short at the current price with a trading objective of $13. Short selling is a speculative technique and not suitable for every investor. Stop-loss orders should be placed when a short sale is executed to protect against potentially unlimited losses. Also, please check with your broker for any special margin requirements and the ability to borrow shares.
McGraw-Hill Companies (NYSE:MHP), a leading global financial information company, has spun off its education business to shareholders. 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 short at the market since a break from $47 should result in a quick fall to the double-bottom at $42, and a break there would likely take it to the mid-30s.
OmniVision Technologies (NASDAQ:OVTI), a manufacturer of integrated and semiconductor image-sensor devices, is primarily focused on camera phone makers. With sales there declining, the company has fallen on hard times. Despite higher January fiscal quarter earnings, future expectations have been lowered by S&P and Raymond James analysts, and so has the anticipated price-to-earnings (P/E) ratio. According to S&P, “Price pressure and market share erosion are likely.”
On March 1, the stock plummeted through its bullish support line at $14, gapping down on high volume. MACD issued a strong sell signal and insiders have been recent sellers. The July low at $11.82 is the stock’s first level of support. A break there would likely result in a plunge to under $10. Sell OVTI at the market.
Newfield Exploration Co. (NYSE:NFX), a domestic oil and natural gas exploration and production company, has had its earnings estimates revised downward by several analysts following a disappointing Q4 report, which missed estimates by a wide margin. High debt and falling production combine to limit future earnings, and insiders have been heavy sellers.
In early February, the stock reversed down from its 200-day moving average at $29, confirming that a bear market was still in place. MACD has flashed a sell signal and it appears that the fragile support at $23 will break. Sell NFX if you own it or sell it short with a trading target of $16.
Swift Energy Co. (NYSE:SFY), an oil and gas exploration company, operates on properties on the U.S. Gulf Coast. Earnings estimates had shown improvement as analysts expected $0.98 in 2013 versus $0.49 in 2012, but Q4 earnings badly missed their target and annual earnings have been adjusted lower. The company had planned to shift more of its production to oil but has not been able to execute the plan.
The stock broke down from a triple-bottom at $14 in late February on high volume. Downside targets are not available, but a low at under $6 was made in 2009. Sell SFY at the market.
VeriSign (NASDAQ:VRSN) is a leading provider of Internet domain name registration. Analysts are concerned about greater government oversight and unexpected weakness in its core business. A recent decision regarding the dot-com renewal agreement with no increases for six years restricts revenue growth for the company.
The stock has recovered from a fall from its October high over $50, which crashed it through a major bullish support line and its 200-day moving average on a breakaway gap. It finally found a bottom under $32 and the recover rally has been impressive, closing two gaps, with the final one at just over $46.
Now, however, it has run into the former breakdown line at $46.80 and appears to be turning down from it. MACD flashed a sell in mid-February. The first support is between $42 and its 200-day moving average at $43. A breakdown there will likely result in a slide to the high $30s. It should be sold by investors and traders alike.
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