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5 Stocks to Sell in December

Unlike most large-cap stocks, these names are not likely to rally into year-end

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Stock to Sell #2 – IBM (IBM)

“Big Blue” is the bluest of the blue-chip technology giants. Its global capabilities in information technology, software, computer hardware and related financing make it a household name. But IBM (IBM) is a company in full maturity, so future growth must result from strong trends in emerging markets, improved profitability in its more developed markets and cloud computing.

S&P expects a 4% decline in revenues in 2013 and earnings of $16.91 per share, down from an earlier estimate of $17.38. It estimates earnings of $17.89 in 2014, but that is uncertain until management can demonstrate improvement in the lagging areas.

I noted in November, with the stock just below $180, that it had topped near $215 in May, beginning a series of declines that created new lows after rallies failed to penetrate the overhanging 50-day moving average.

In October, the stock broke to a low at about $173 on a high-volume continuation gap. A subsequent reaction rally closed that gap but failed to hold above its 50-day moving average, now at $182.

Traders should sell IBM short with a downside target of $170 and a stop-loss at $187. Long-term holders should protect their positions with defensive options strategies.

IBM Chart
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