With the fourth quarter upon us, we’re in the home stretch for the investing year, and that means the clock is ticking on paring stocks to sell from your portfolio.
After all, with the market up less than 7% for the year-to-date — and with most of those upside having come way back in the first half — protecting gains is more important than chasing upside.
In other words: The market is having a respectable year; don’t get greedy.
Stocks with poor technicals, price momentum only to the downside and a poor track record of seasonality stand out as stocks to sell for October. Odds are they’re are only going to weigh on your portfolio and rob some of your hard-won gains.
The S&P 500 is littered with stocks to sell across a range of industries and sectors flashing technical warning signs. However, after screening the market for momentum, relative strength and historical performance, some stocks to sell stood out more than others.
Whether it’s a recently carved-out death cross or a decade’s worth of crummy October price performance, these five names were the leaders of the stocks-to-sell pack:
Stocks to Sell: Fossil (FOSL)
Click to Enlarge Watchmaker Fossil (FOSL) has run out of time this year. Ugly technicals, poor seasonality and a lack of momentum doom the stock for more losses in October.
Fossil’s stock chart is one of futility in 2014. FOSL fell through its 200-day moving average last spring and never recovered. Even worse, it keeps trying to clear its 50-day moving average but has found resistance at the key level all year long.
FOSL stock is now 30% below its 52-week high, 6% below its 50-day moving average and 13% below its 200-day. True, the relative strength indicator (RSI) of 13 suggests the stock is oversold — but take a look and you’ll see that oversold conditions haven’t translated to sustained upside all year long.
History is against FOSL stock too. Over the last 10 years, shares have an average October loss of 0.6%, according to data from Thomson Reuters Stock Reports.
Stocks to Sell: CBS (CBS)
Click to Enlarge CBS (CBS) stock managed to stay positive — albeit not by much — all year until recently, but now that it has broken its technicals, there’s only more room to fall.
CBS fell through its 50- and 200-day moving averages in the middle of the summer, and it has been fighting a losing battle ever since as both levels now offer resistance that the stock can’t overcome.
As a result, CBS stock is now 21% below its 52-week high, 8% below its 50-day and 12% below its 200-day moving average. Again, the RSI of 23 suggests shares are oversold. That has been a buy signal a couple time this year, but only for a very quick flip. Other times it hasn’t worked at all.
Past Octobers have been no good for CBS either. It loses an average of nearly 1% over the course of the month.
Stocks to Sell: Diamond Offshore (DO)
Click to Enlarge Offshore drillers like Diamond Offshore (DO) are having a nightmare year when it comes to fundamentals, so it’s not surprising the technicals stink too.
DO hasn’t even sniffed its 200-day moving average this year, and the 50-day is rapidly moving farther away too. The stock is now 47% below its 52-week high, 20% below its 50-day and 29% below its 200-day.
Indeed, DO has never been above its 200-day MA in 2014 and is nowhere near testing its 50-day.
DO stock’s RSI of 11 says deeply oversold, but this thing has been oversold plenty of times this year and has still be a steady loser. RSI is a sucker’s play in this case.
As for seasonality and DO stock, forget it. Shares lose an average of 0.4% in October, according to Thomson Reuters Stock Reports.
Stocks to Sell: Goodyear Tire & Rubber (GT)
Click to Enlarge Goodyear Tire & Rubber (GT) looked like its technicals were improving a couple of months ago, but then a sharp selloff touched off a technical crisis from which shares still are reeling.
GT had support at its 50-day moving all year long until the end of July, but then plunged through that level and its 200-day moving average within sessions of each other. The 200-day MA is now putting up resistance, and the 50-day just described a death cross.
GT is now 21% below its 52-week high, 10% below its 50-day and 12% below its 200-day moving average. The RSI of 18 looks meaningless. Any prior upticks have been too brief and shallow to risk trading. The trend is definitely down.
October isn’t kind to GT stock, either. Goodyear losses an average of 4.3% over the course of the month.
Stocks to Sell: Whole Foods (WFM)
Click to Enlarge Whole Foods (WFM) performed a death cross last spring, and it sure wasn’t kidding. Shares have been in an ugly downtrend ever since.
WFM stock has been working back toward its 50-day moving average for months now is testing it repeatedly these days, but resistance there remains firm. As for its 200-day moving average, WFM stock hasn’t been within spitting distance of the level since March.
As a result. WFM is 42% below its 52-week high, less than 1% below their 50-day and 16% below their 200-day moving average. The RSI tells us nothing; at 46, Whole Foods is neither overbought nor oversold.
Seasonality, however, is definitely against WFM. It loses an average of 0.9% in October.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
