Despite the last day of May’s dramatic sell-off, the major trend of the market is still strongly positive. However, the fact that the S&P 500 penetrated the near-term support line at 1,635, closing at 1,631, should give short-term traders reason to pause. If the S&P 500 were to continue lower, then the Key Reversal Day of May 22 will have been confirmed and stocks should test the next line of support at 1,600.
In a market that has become increasingly volatile, it is important to raise cash in order to take advantage of bargain days that accompany such volatility. The stocks on this list have various technical characteristics that make them dangerous holdings in a volatile market. Thus, selling them could be an excellent source of funds or shorting them an excellent source of profits.
Here is our list of stocks to sell in June:
Stock to Sell #1 – Allegheny Technologies (ATI)
Allegheny Technologies (ATI), a producer of flat-rolled steel and high-performance metals, has been challenged by weak product demand, low prices and high imports in its flat-rolled steel segment. S&P recently reduced its opinion due to a 7% decline in EBIT and has cut its 2013 earnings forecast by $1.15 to just $1.22.
The stock is trading in a descending triangle with support at $26. The 50-day moving average crossed under the 200-day in April. This is a bearish development called a “death cross,” and it signals a resumption of a bear market in this stock. A close under $26 would confirm that a new leg of a bear market has begun. Sell ATI at the market or on a close under $26 for a plunge to the teens.
Stock to Sell #2 – Autodesk (ADSK)
Autodesk (ADSK) is a leading provider of software for computer-aided design (CAD) that sells its products globally. It recently restructured its operation to support more cloud and mobile-based offerings. But weaker-than-expected global conditions, a significant loss of market share, and less-than-expected cost savings have had a negative impact on earnings.
The chart of ADSK appears to have an ominous head-and-shoulders forming. Further cause for concern occurred in late May when our proprietary internal indicator, the Collins-Bollinger Reversal (CBR), flashed a sell signal. Sell ADSK if it closes under the neckline of the head-and-shoulders at $36. The target for a decline is $31 or lower.
Stock to Sell #3 – Bunge Ltd. (BG)
Bunge Ltd. (BG), a large agribusiness and food company, was recently revised by Fitch to “stable.” But currency uncertainties and food shortages have worked against a turnaround for the company, and the stock has been in a bear market since February.
In late May, BG broke down from an attempt to punch through its 200-day moving average, and a death cross was executed. Also note that the CBR triggered a sell signal and MACD went negative. Sell BG at the market.
Stock to Sell #4 – Newmont Mining (NEM)
Newmont Mining (NEM) is one of the largest gold and copper producers in the world. It was on our list of Stocks to Sell in April, when I said: “A recent recovery rally from its March low of $38.50 appears to be stalling at its 50-day moving average, now at $42.10. Buying volume is declining, and so the stock doesn’t appear to have enough momentum to complete a reversal up.”
As expected, the recovery failed and the stock plunged to $30.30. In late May, Zacks downgraded NEM to “underperform” and ranks it a “strong sell” because of lower Q1 earnings and sales due to increasing mining costs and lower ore grades.
A recent rally with a positive MACD seems doomed to fail at its 50-day moving average line at $35.14. It is in a pronounced bear market with fragile support at its recent low at $30.30. Sell NEM at the market or sell it short with a price objective in the mid-$20s.
Stock to Sell #5 – Newfield Exploration (NFX)
Domestic oil and natural gas exploration and production company Newfield Exploration (NFX) has had its earnings estimates revised downward by several analysts following a disappointing Q4 report that missed estimates by a wide margin. High debt and falling production combine to limit future earnings, and insiders have been heavy sellers. Q1 2013 showed a slight improvement, but NFX still had a net loss of $0.06 per share.
In our Stocks to Sell in May, we recommended selling the stock if it advanced to $24. It rallied to $25.73 in mid-May, but broke down on May 31 on high volume after the CBR issued a sell signal followed by a sell signal from MACD. Sell NFX at the market or sell it short with a price objective of $18.
Stock to Sell #6 – Ultratech (UTEK)
Ultratech (UTEK) develops and manufactures laser thermal processing and inspection equipment. Analysts project the stock will underperform the market over the next 6 to 12 months. Earnings for fiscal year 2013, ended in June, are projected at $1.45 from a prior estimate of $1.60.
Technically, the 50-day moving average crossed under the 200-day moving average, forming a death cross. MACD is in bullish territory following a two-month bounce from its low of $28.50 in April. Sell UTEK at the market if you own it. Traders may want to sell it short with a price objective of $29.